HONG KONG, 3 October 2025. The issuance of Dim Sum bonds and convertible bonds in the offshore Chinese bond market has picked up in the third quarter of 2025. Specifically, the issuance of convertible bonds in the first three quarters of 2025 increased by 27% year-on-year. Following two consecutive years of rapid growth in 2023 and 2024, Dim Sum bond issuance showed weakness in the first half of 2025, primarily due to lower issuance from Local Government Financing Vehicles (LGFVs). However, the market regained momentum in the third quarter, with issuance growing by 9.3% year-on-year. The proportion of issuances by financial institutions increased to 43% in 2025, while the proportion of LGFV issuances declined significantly, dropping from 62.6% in 2024 to 35.4% in 2025. Other issuers included companies such as Baidu and State Grid Corporation. Additionally, international companies such as Nestlé, PSA International, and Chubb Insurance tapped into the Dim Sum bond market in 2025, contributing to a more diversified issuer base.
The issuance of convertible bonds continued to break records from 2024 to 2025. In 2024, total issuance reached US$17 billion (excluding mandatory convertible bonds from Chinese developers’ restructuring), representing a year-on-year increase of 325.3%. In the first three quarters of 2025, issuance further climbed to US$18 billion, reflecting a 27.0% year-on-year growth. Over the past two years, Chinese internet companies have remained the primary contributors to offshore convertible bond issuance. Since 2025, Chinese insurance companies have increasingly turned to zero-coupon H-share convertible bonds, with notable successful issuances by Ping An Group and China Pacific Insurance within the year.
Dim Sum Bonds Remain Popular Among Both Investors and Issuers
Dim Sum bonds continue to be attractive. The resumption of Federal Reserve rate cuts and a weakening US dollar have shifted global asset allocation preferences, boosting interest in RMB-denominated assets and driving investors toward Dim Sum bonds. For domestic investors, the interest rate gap between domestic and offshore markets persists, maintaining the appeal of offshore RMB bonds.
The rising demand for Dim Sum bonds has driven down their financing costs. The average coupon rate of Dim Sum bonds is approximately 200 basis points lower than that of U.S. dollar bonds with the same maturity. This cost advantage makes Chinese issuers with overseas financing needs increasingly inclined toward this option.
Capital Expenditure by Tech Companies Drives Convertible Bond Issuance
Chinese tech companies have dominated the issuance of convertible bonds in the offshore Chinese bond market, driven by a strong equity market and growing investor appetite for hybrid assets. In the global high-interest rate environment, tech and high-growth companies are increasingly leveraging convertible bonds. Year-to-date, tech companies have represented 12.0% of Dim Sum bond issuances (excluding sovereign and government bonds) and 41.7% of convertible bond issuances. The proceeds raised will primarily be used in cloud computing, artificial intelligence infrastructure, and overseas business expansion.
Since 2023, capital expenditure by Chinese tech companies has been on the rise and is expected to reach its peak in 2025 and 2026. According to Bloomberg estimates, the combined capital expenditure by Alibaba, Tencent, Baidu, and JD.com on AI infrastructure and services is projected to exceed US$30 billion in 2025, a significant jump from less than US$13 billion in 2023.
“Southbound Connect” Expansion Drives Demand for Chinese Offshore Bonds
The expansion of “Southbound Connect” has boosted investment demand for Chinese offshore bonds. In July, the People’s Bank of China and the Hong Kong Monetary Authority introduced several enhancements to the “Bond Connect” scheme, expanding eligibility to four categories of non-bank financial institutions: securities firms, fund managers, insurers, and wealth management companies. This initiative has effectively widened the investor base for offshore RMB bonds, thereby driving up demand for Chinese offshore bonds.
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