China Launches Dollar-Bond Sale

China launched a sale of U.S. dollar bonds, in a test of investor appetite after data showed the world’s second-largest economy is cooling rapidly.

The country’s Ministry of Finance appointed 14 banks, including both international and domestic firms, to run the bond sale, according to notices sent Monday to investors. This would be the fifth year in a row that China has raised billions of dollars with a fall sale of debt in the international bond markets.

The ministry previously said that it would issue $4 billion of bonds, including debt maturing in 3, 5, 10 and 30 years’ time. On Tuesday morning Hong Kong time, banks handling the sale released initial price guidance on the new bonds. It ranged from around 0.35 percentage point over equivalent U.S. Treasurys for the three-year debt, to around 0.85 percentage point over Treasurys for the 30-year debt.

On Monday, China said its economy grew 4.9% from a year earlier in the third quarter, down from 7.9% in the previous period. Several issues are weighing on growth, including power shortages, supply-chain problems and regulatory pressure on the tech and property sectors, which has helped push giant developer China Evergrande Group EGRNF 6.44% to the brink of default.

Last week, the cost of insuring Chinese government dollar debt against default, as measured by credit default swaps, surged to its highest point since April 2020, when the early stages of the global Covid-19 pandemic were roiling global markets.

Default swaps on China rose above 0.57 percentage point, meaning it cost more than $57,000 a year to insure $10 million of debt against default, according to Refinitiv. Still, that figure has since receded—to about 0.51 percentage point as of Friday—and remains far below highs hit in recent years. As recently as early 2017, Chinese CDS traded above 1 percentage point.

China has solid investment-grade credit ratings, with an A1 rating from Moody’s Investors Service and similar A+ grades from S&P Global Ratings and Fitch Ratings. Those grades are in line with Japan’s.

Moody’s said volatility in the property sector is unlikely to present a systemic threat, but it could lower revenues for regional and local governments, who depend on land sales for large chunks of their income, while adding pressure on some small regional banks.

Last week, China’s central bank said the risk of Evergrande’s problems spilling over into the financial system was controllable and individual financial institutions didn’t have large exposures to Evergrande.

Last fall, China issued $6 billion of dollar bonds, with five to 30-year maturities. It also sold the equivalent of about $4.7 billion of bonds in euros, including its first negative-yielding debt.

Evergrande, China’s most indebted property developer, has kept global markets on edge and sparked protests at home as it struggles to survive. WSJ explains why the company’s crisis is raising questions about the state of the world’s second-largest economy. Photo: Alex Plavevski/Shutterstock

Like last year’s dollar bonds, this year’s will be sold in both a 144a format, which allows debt to be sold to investors in the U.S., as well as under the less onerous Regulation-S framework for international debt sales, the notice to investors showed.

Write to Frances Yoon at

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Appeared in the October 19, 2021, print edition as ‘Beijing Sells $4 Billion of Dollar Bonds.’