Offshore borrowing in China’s currency reached a record high this year, driven by increased demand from international corporations and foreign governments seeking cheaper funding amid persistently low interest rates in China. Renminbi-denominated bond issuance through both the dim sum market—bonds issued outside mainland China—and the panda bond market—bonds issued within the mainland by foreign entities—has surpassed Rmb1 trillion ($149 billion) in 2026, exceeding last year’s total, which was itself a record.

The surge in offshore renminbi debt issuance aligns with Beijing’s broader strategy to expand the global use of its currency and challenge the dominance of the U.S. dollar. The appeal of renminbi borrowing has grown due to a pronounced divergence in borrowing costs between China and the United States. Chinese 10-year government bonds currently yield about 1.68%, while comparable U.S. Treasury bonds offer nearly 4.78%, marking one of the widest spreads in recent history.

So far this year, the dim sum bond market has issued Rmb786.3 billion, surpassing last year’s full-year record, while panda bond issuance has hit Rmb231.6 billion, already outpacing any previous annual total. While foreign borrowers are prominent, Chinese entities account for roughly two-thirds of dim sum issuance, using the proceeds to fund overseas expansions or pay suppliers.

Market participants attribute the surge to several factors, including a recent increase in the quota for mainland investors accessing Hong Kong’s Bond Connect program, which facilitated easier southbound investment flows. This policy adjustment has been credited with supporting the rise in longer-dated dim sum bonds, as domestic insurance companies and banks seek higher-yielding assets amid a slowdown in onshore credit demand. New bank loans in China dropped by Rmb340 billion in July, marking the largest monthly decline on record.

Major corporations such as Tencent have issued dim sum bonds with maturities up to 30 years. Despite the overall growth, renminbi-denominated bonds still form a small fraction of China’s fixed income market. As of this year, panda bonds represent only about 0.25% of the country’s total bond market.

The panda bond market has attracted sovereign issuers including Indonesia, Slovenia, Pakistan, and Kazakhstan over the past year, but the primary growth drivers remain Chinese and non-Chinese banks. Notably, UBS completed a Rmb2 billion five-year panda bond issuance in August, while Goldman Sachs issued Rmb61.5 million in dim sum bonds. These foreign banks typically convert renminbi proceeds into other currencies for their international operations. However, large multinational corporations remain less active in renminbi bond markets, citing factors such as the relatively small average issuance size and challenges in accessing a broad investor base.

Market experts note that attracting mainland institutional investors to these offshore and onshore renminbi debt markets requires extensive and prolonged marketing efforts, partly due to restrictions on investment approvals. This contrasts with western investors, who typically rely on credit ratings for purchasing decisions.

Although the renminbi’s role in global finance has expanded—particularly in trade finance and offshore loans—its stature as a reserve currency remains limited. Despite outperforming G7 sovereign debt since 2020, Chinese government bonds’ low yields have prompted global fund managers to moderate increases in their renminbi allocations.

Some analysts suggest the rapid growth of the panda and dim sum bond markets could signal the emergence of the renminbi as a more prominent global funding currency, a development similar to the rise of the Japanese yen during periods of low interest rates and deflation in Japan. "Low interest rates make a currency attractive for funding purposes," said Goldman Sachs’ chief China economist Hui Shan, drawing parallels between current trends in the renminbi markets and the historical experience of the yen.