Chinese corporates return to the dollar bond market

Three years after retreating from international debt markets, Chinese companies are staging a comeback to dollar bonds.

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The revival comes after a period that saw the near-collapse of China’s high-yield bond market, once a cornerstone of Asia’s debt landscape. The sector’s dramatic decline is stark: Chinese property developers, which commanded 40% of Asia’s high-yield market in 2020, now represent merely 8%.

This downturn began with property giant Evergrande’s catastrophic default on both onshore and offshore debt, triggering a cascade of failures across leading developers. A widespread default crisis inflicted substantial losses on investors. These bonds, once prized for their high returns and manageable risk, became toxic assets from which investors fled.

The retreat also stemmed from the diverging monetary policies between the US and China. As the Federal Reserve embarked on an aggressive rate-hiking cycle over the past two years, China moved in the opposite direction, cutting rates. This widening interest-rate differential prompted many Chinese corporates to abandon dollar financing in favour of cheaper domestic funding options.

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High-yield returns?

However, Chinese corporates are making a return to the market. Two weeks ago, Shanghai-headquartered Fosun International marked a milestone with a US$300 million high-yield bond issuance, after more than three years of absence.