Low interest rates have sparked a global rush to borrow in China, the outlet has said
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Global companies are reaping record profits through yuan-denominated bonds and are borrowing heavily from Chinese lenders at low interest rates, at a time when the cost of using Western banks is skyrocketing, Reuters reported on Friday.
According to the news agency, international companies and banks are raising record amounts of cash through Chinese ‘panda’ and ‘dim sum’ bonds denominated in yuan.
“While the fundamental story is not compelling for Chinese investors looking for growth, the depreciation of the yuan as well as the rate cuts result in a much cheaper cost of borrowing,” said Fiona Lim, senior FX strategist at Maybank.
The uptick in China’s borrowing market has made the yuan the world’s second-biggest trade funding currency, ahead of the euro. The development reflects Beijing’s ambitions to boost the yuan’s share in global funding, Reuters added.
According to the report, the National Bank of Canada raised 1 billion yuan ($138.6 million) in October from the sale of a three-year panda bond at a coupon of 3.2%, while domestic interest rates stood at 4.5%.