Hainan, China's southernmost province, plans to issue 3 billion yuan ($421.8 million) in offshore renminbi bonds in Hong Kong, marking its third consecutive year participating in the dim sum bond market. This issuance, divided into three tranches, includes green and blue bonds aimed at environmental and ocean-related projects, and a five-year bond for general government purposes.

Hainan's bond sale aligns with its broader sustainability efforts, and the expected pricing will occur on Thursday. Joseph Chan Ho-lim, Hong Kong's Under Secretary for Financial Services and the Treasury, highlighted the significance of this 10-year bond—the province's first of such duration—as a crucial addition to Hong Kong's offshore renminbi offerings. “Hong Kong remains Asia's largest international bond issuance hub, with the world's largest offshore renminbi liquidity pool,” said Chan, emphasizing the city's vital role as a financial bridge between mainland China and global markets.

Kenneth Hui Wai-chi, Executive Director of the Hong Kong Monetary Authority, further emphasized that the bond structure demonstrates the mainland's commitment to sustainable development and national goals like carbon neutrality by 2060. The bond proceeds will be channeled toward key areas like marine protection and water pollution control, reflecting China's growing emphasis on sustainable development.

Hong Kong's role in dim sum bonds dates back to 2007, when the city became the first offshore market to issue renminbi-denominated bonds. The market has since expanded significantly, fueled by both demand for RMB-denominated assets and the comparative cost advantages of issuing dim sum bonds over dollar-denominated ones.

In 2024, the dim sum bond market saw rapid expansion, with issuance reaching 2.91 trillion yuan by mid-year, a significant increase from 1.72 trillion yuan during the same period last year. This growth is largely driven by the demand for Chinese assets, especially after the launch of the Bond Connect program, which has allowed mainland funds to flow into Hong Kong.

Notably, Shenzhen's state-owned enterprise, Futian Investment Holding, issued 30 billion yuan worth of dim sum bonds in October at a historically low coupon rate of 2.7%, setting a new benchmark for offshore local government debt.

The rise of dim sum bonds is also bolstered by the high yields offered by Chinese urban investment bonds, which have become attractive to global investors seeking higher returns amid declining interest rates in China. Analysts expect this trend to continue as long as the cost of issuing dim sum bonds remains favorable compared to dollar-denominated alternatives.

As Hong Kong solidifies its position as the world's largest offshore RMB business hub, its dim sum bond market is poised to remain a key financing channel, bridging Chinese issuers with global investors and reinforcing the renminbi's internationalization.