Pakistan is poised to become the latest partner in a China-centred trading network, known as the Belt and Road Initiative, to sell “panda bonds”.
Islamabad seeks to raise as much as US$250 million through its first-ever sale of the bonds – yuan-denominated debt instruments sold by foreign entities in mainland China’s onshore market – as early as this week.
Finance Minister Muhammad Aurangzeb confirmed on Saturday that Islamabad was preparing to access Chinese capital markets with the sale – the first tranche of a broader US$1 billion programme that Islamabad has been pursuing since at least December.
The three-year bonds, focused on sustainable development, will carry guarantees from the Asian Infrastructure Investment Bank (AIIB) and the Asian Development Bank covering 95 per cent of the debt issuance, according to Bloomberg.
The planned deal comes as Pakistan steps up its return to international capital markets following years of financial instability. Aurangzeb said the country successfully raised US$750 million in April through the sale of Eurobonds – international debt typically priced in US dollars, despite the name. That marked Islamabad’s first international bond sale in four years.
The panda bonds would add a yuan-denominated funding source to that effort, allowing the nation to benefit from lower Chinese interest rates compared with the higher costs of borrowing in US dollars.
The structure mirrors a model Aurangzeb flagged in early 2025, when he said that Islamabad would replicate Egypt’s AIIB-backed credit enhancement to access China’s local capital markets. He described the move as “absolutely critical” for Pakistan in efforts to diversify its funding base. Pakistan has faced persistent debt troubles in recent years, receiving a US$7 billion International Monetary Fund bailout in 2024 after being pushed to the brink of default in 2023.
The Pakistan embassy in Beijing did not immediately reply to a request for comment.
Pakistan’s planned deal comes after Kazakhstan’s sovereign wealth fund, Samruk-Kazyna, last month became the first entity in Central Asia to issue panda bonds, raising 3 billion yuan (US$441 million) at a low interest rate of 2.18 per cent. The decision came as global investors seek safe havens amid geopolitical uncertainties such as the US-Israel war on Iran.
Indonesia also appears to be eyeing panda bonds, with Finance Minister Purbaya Yudhi Sadewa saying Jakarta was planning to issue them as soon as June as part of a strategy to diversify financing sources, according to reports from Indonesia’s state news agency, Antara.
“The successive entry of Pakistan, Kazakhstan and Indonesia into China’s panda bond market reflects a clear trend: the market is accelerating towards becoming a mature international renminbi-financing platform,” said Wang Qian, a senior analyst at Fareast Credit Rating.
Panda bond sales hit a record 84.2 billion yuan (US$12.4 billion) in the first quarter, double the amount from a year prior, according to Bloomberg’s data.
Wang attributed the trend to various factors, including the cost advantage of yuan-denominated financing over euro and dollar bonds amid global monetary policy divergence; the widening use of the yuan as a financing currency beyond trade settlement; and rising demand for Chinese assets as a relative haven amid geopolitical uncertainty.
“Sovereign panda bonds can, to some extent, be seen as a barometer of the depth of economic and financial cooperation between two countries,” Wang added. “In the current geopolitical environment, such local-currency financing arrangements also tend to reflect a higher degree of mutual trust.”
Separately, other nations along the belt and road plan’s trade routes, including Hungary, Poland, Egypt, Kazakhstan, the Philippines and the UAE, have, as sovereign entities, raised a total of 26.5 billion yuan through panda bond offerings since 2017, according to calculations by the South China Morning Post.
Global investors have increasingly turned to Chinese assets amid geopolitical uncertainties, with Chinese government bond yields remaining broadly stable within a narrow range of 1.7 to 1.8 per cent over the past six months. -- SOUTH CHINA MORNING POST
