The appeal of DotSEN debt is rising! Strong demand from both issuers and investors

Recently, as the RMB exchange rate appreciates and the internationalization process accelerates, the demand from issuers and investors in the Dim Sum bond market has both increased. Recently, the Chinese Ministry of Finance issued 2-year, 3-year, and 5-year government bonds in Hong Kong, with issuance rates reaching their lowest levels since 2013. In 2025, major tech companies such as Tencent, Alibaba, and Baidu also issued Dim Sum bonds successively, offering yields that are quite attractive to international investors.

By the end of 2025, the Dim Sum bond market had experienced six consecutive years of growth, with an outstanding scale of approximately 1.3 trillion yuan. It has been primarily dominated by Chinese issuers (accounting for 69%), but last year, 17 global issuers entered the market for the first time. In the future, it is expected to attract more global issuers sensitive to financing costs and domestic and foreign investors seeking higher yields.

Two Major Changes in Issuer Structure

Recently, the Chinese Ministry of Finance issued 2-year, 3-year, and 5-year government bonds in Hong Kong at rates of 1.38%, 1.4%, and 1.57%, respectively, all hitting their lowest levels since 2013. Morgan Stanley also claimed that 10-year RMB financing has become the cheapest option globally, with an interest rate of about 1.9%.

With the RMB exchange rate appreciation and the acceleration of internationalization, demand from both issuers and investors in the Dim Sum bond market has increased. Among them, interest rate Dim Sum bonds have steadily expanded, while credit Dim Sum bonds have experienced structural changes.

Statistics show that offshore central bank bills’ regular issuance has driven continuous growth in scale, with interest rate Dim Sum bonds constituting the main market component, accounting for 66% of the total issuance in 2025. Regarding credit Dim Sum bonds, the issuer type has shifted from local government financing vehicles (LGFVs) to industrial bonds, with the proportion of industrial bonds increasing.

From 2022 to 2024, aggressive rate hikes by the Federal Reserve increased the cost of USD-denominated Chinese bonds, coupled with tightening domestic LGFV financing, leading some financing needs to shift to the Dim Sum bond market. This pushed the issuance scale of LGFV Dim Sum bonds from 6.6 billion yuan in 2021 to 159.2 billion yuan in 2024, with their share of credit Dim Sum bonds rising from 18% in 2021 to 44% in 2024.

Since 2025, stricter regulation of LGFVs has made industrial bonds a new support, with the share of credit bonds falling back to around 30%. Supported by the rollover demand after Chinese USD bonds mature and some companies’ overseas financing needs, the issuance scale of industrial Dim Sum bonds has continued to grow, from 2.1 billion yuan in 2021 to 79.6 billion yuan in 2025.

In 2025, the main issuers of industrial bonds were internet giants and state-owned infrastructure companies. Baidu Group and State Grid’s overseas investments led with issuance scales of 14.4 billion yuan and 14 billion yuan, respectively. Leading internet companies like Tencent and Meituan also issued sizable amounts. According to the China Bank Global Coordinator, the total subscription amount for tech companies’ Dim Sum bonds in 2025 approached 150 billion yuan, 3.2 times the issuance amount.

Additionally, Chinese issuers remain the main force in the Dim Sum bond market, but their growth rate has begun to slow. Conversely, the market size of global issuers has steadily increased for three consecutive years. Future incremental growth in Dim Sum bonds may increasingly be driven by global issuers entering the market.

Three Factors Enhancing Attractiveness

Currently, the demand and growth of Dim Sum bonds are mainly driven by three factors: financing costs, RMB internationalization, issuer structure changes, and yields.

First, favorable financing costs and RMB internationalization. Currently, with diverging monetary policies between China and the US— the Federal Reserve maintaining high interest rates while domestic rates in China continue to decline—the average issuance rate of Dim Sum bonds is over 2 percentage points lower than that of USD bonds of the same tenor. Additionally, denominating in RMB can hedge against USD exchange rate fluctuations and reduce foreign exchange risk management pressure.

China Galaxy Securities Fixed Income Team believes that, taking tech issuers as an example, on one hand, facing high USD financing costs, they extend debt durations through the low-interest-rate window of the Dim Sum bond market to lock in lower long-term financing costs. The top four industrial bond issuers have an average issuance period of 9.7 years. On the other hand, these companies have significant funding needs for overseas expansion, cutting-edge technology investments, and high-end equipment procurement. Offshore financing becomes an efficient way to support their global operations and AI strategies, avoiding cross-border capital transfer frictions.

Second, structural changes in Dim Sum bonds. In 2025, the market saw 17 first-time issuers from 11 different countries, the highest since 2016. These issuers include sovereigns, banks, and corporations, injecting new vitality into market growth. Meanwhile, the proportion of industrial bonds increased, while LGFV bonds declined, and the available investment targets have also diversified.

Third, for domestic and foreign investors seeking high-quality RMB fixed-income products, Dim Sum bonds issued by global investment-grade companies offer relatively high yields, effectively supporting market demand.

(Source: Securities Firms China)