(Yicai Global) Jan. 2 -- Chinese companies' dollar debt issuance continued to surge last year, Bloomberg data show.
Chinese firms issued 2,157 dollar-denominated bonds last year, raising USD313.9 billion, with the number of issuances and the amount raised increasing annually by respective factors of 2.43 and 6.23.
Increases in interest rates on the domestic bond market pushed companies to explore financing alternatives, industry experts said. The stability of the yuan exchange rate and the complementarity of domestic and offshore markets also fueled Chinese companies' issuance of dollar debt, they said.
Chinese firms have a lot of room for dollar debt as the yuan internationalizes and China's capital markets align with global standards, they added.
The average rate of Chinese companies' US dollar bonds was around 3.1 percent at issuance. Interest rates for industries such as exploration and production, public facilities, food and beverage, property and accident insurance ranged between 3 percent and 4 percent at issuance.
Issuance interest rates for the banking, securities, exploration and mining industries offshore were lower than those onshore, while rates for the insurance, real estate and coal industries were higher offshore than those onshore. Offshore debt issuance still has cost advantages for investment-grade firms, said Zhang Yu, chief of macro and fixed income at Minsheng Securities.
Demand for 30-year bonds with secondary market liquidity exists among offshore investors. Many large state-owned enterprises such as State Grid Corporation of China have issued 30-year dollar bonds.
Alibaba Group Holding Ltd. [NYSE:BABA] completed a one-time five-year, 10-year, 20-year, 30-year and 40-year bond issuance in November, said Ivan Chung, head of Moody's China Credit Research and Analysis.
"Some may be worried that if the US further hikes base interest rates in 2018, offshore financing of Chinese companies will be reduced," Chung said, adding that short-term exchange and interest rates will motivate Chinese groups to issue bonds in the dollar market.
Chinese rating agencies made major layouts in overseas markets in the past two years. Some issuers are considering using domestic rating agency services for offshore bonds issuance. Many companies will likely choose to issue bonds rated by both international agencies and domestic ones.
China Chengxin International Credit Rating Co., Shanghai Brilliance Credit Rating & Investors Service Co., United Credit Ratings Co. and Colden Credit Rating International Co. have put money into this area. Many real estate and city investment groups have chosen Chinese rating agencies in the process of issuing dollar debt.