A view of the core Lujiazui commercial area in Pudong New District, Shanghai on July 15, 2025 Photo: VCG

The National Association of Financial Market Institutional Investors (NAFMII) announced on Monday that Morgan Stanley issued 2 billion yuan ($279.85 million) in panda bonds in China's interbank bond market, the first such issuance by a US-headquartered company, and the total panda bond issuance in China's interbank market has reached 111.2 billion yuan so far this year. 

The five-year bonds carry a coupon rate of 1.98 percent and attracted strong demand from investors. This milestone diversifies the panda bond issuer pool and advances the high-quality development of China's bond market, the NAFMII said in a statement. 

Morgan Stanley confirmed in a statement sent to the Global Times on Tuesday that the issuance was completed last week. 

Panda bonds - yuan-denominated debt securities issued by overseas entities in China - serve as a vital financing channel for international institutions.

According to the NAFMII, since the beginning of this year, foreign governments, international development institutions and multinational corporations have been particularly active in panda bond issuances, accounting for 50 percent of the total amount, up 27 percentage points compared with the full year of 2024. To date, panda bond issuers in the interbank market have come from Asia, Europe, Africa, North America and South America.

Recent issuers include the Hungarian government and the Asian Infrastructure Investment Bank (AIIB).

On July 22, Hungary made waves by issuing 5 billion yuan of panda bonds, comprising 4 billion yuan at 2.5 percent for three years and 1 billion yuan at 2.9 percent for five years, setting records as the largest single issuance by a foreign government. Hungary has also become the foreign government with the largest issuance and stock scale of panda bonds so far, the Economic Information Daily reported.

The AIIB contributed to this trend with its 2 billion yuan in two-year panda bonds, with a rate of 1.64 percent. The bond attracted overwhelming demand and was oversubscribed 3.2 times, the highest ratio in the AIIB's panda bond issuance history, according to the report.

Zhao Qingming, a Beijing-based financial industry analyst, told the Global Times on Tuesday that the active issuance of panda bonds by multinational enterprises and other overseas institutions stems from the overall market sentiment favoring Chinese assets.

"Panda bonds offer a compelling alternative for international institutions, especially in the current climate of elevated US dollar financing costs. China's proactive policies to facilitate panda bond issuance, combined with the relative stability of yuan-denominated assets, are driving broader optimism among foreign issuers," Zhao added.

Supporting this growth, regulatory reforms have strengthened the bond market for overseas issuers through improved issuance procedures and more flexible fund rules, providing a stable regulatory framework and boosting issuer participation, according to the Economic Information Daily. 

Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times that the increasing appeal of panda bonds reflects growing international confidence in yuan-denominated assets. Compared with other major currencies, the relative stability of the yuan's exchange rate effectively mitigates foreign exchange risks, making yuan assets attractive for both yield generation and capital preservation purposes, he said.

Regulatory evolution, combined with China's broader financial opening-up, has created an increasingly attractive environment for international issuers looking to access China's vast capital markets, Xi Junyang said.

In the first half of 2025, overseas holdings of yuan bonds exceeded $600 billion, a record high, the State Administration of Foreign Exchange (SAFE) said on July 22.

The SAFE attributed this positive trend to China's resilient economic fundamentals supported by effective domestic policies, ongoing financial market liberalization through expanded cross-border investment channels, and growing global demand for portfolio diversification. A recent survey showed that 30 percent of 75 central banks worldwide plan to increase their yuan holdings.

As China continues to advance financial reform and opening-up, its domestic markets will become further integrated into the global financial system, making yuan-denominated assets increasingly attractive, the SAFE said.