(Yicai) April 1 -- The strong driving forces of the internationalization of the Chinese yuan are clearly emerging from lenders’ annual financial statements, given their solid performance in cross-border yuan settlement and panda bond underwriting.

Bank of China helped more than 30 overseas entities issue panda bonds last year, with the total underwriting amount reaching CNY38 billion (USD5.5 billion), ranking first nationwide for the 12th consecutive year, Executive Vice President Yang Jun said during the company’s 2025 earnings conference call on March 30.

Moreover, BOC assisted 81 entities in issuing offshore Chinese yuan-denominated bonds for an underwriting amount of over CNY110 billion (USD16 billion), Yang noted.

The Chinese branches of BOC handled about CNY18 trillion (USD2.61 trillion) cross-border yuan settlements last year, accounting for one-fourth of the total market, according to the lender’s financial statement. Of that, over 30 percent was for goods trade.

BOC’s top customer service coverage rate of cross-border e-commerce exceeded 80 percent, with the yuan settlement volume surpassing CNY1 trillion, accounting for over 90 percent of the total.

Industrial and Commercial Bank of China underwrote 46 panda bonds for 28 issuers last year, with the amount reaching CNY25.5 billion, according to its 2025 earnings statement. It was the lead underwriter of the first panda bonds issued by a US entity, an African international development institution, and a UK entity, as well as of multiple sovereign panda bonds issued by Belt and Road Initiative member countries.

ICBC’s cross-border yuan settlement business exceeded CNY10 trillion last year.

China Construction Bank underwrote 21 panda bonds worth a total of CNY13.1 billion last year, up 62 percent and 128 percent, respectively, from 2024, the firm said in its 2025 financial report. CCB’s cross-border yuan settlement business reached CNY6.5 trillion (USD945.7 billion), achieving double-digit growth.

Panda bonds are yuan-denominated bonds issued by overseas institutions in China. Governments of multiple countries, international development institutions, financial institutions, and large enterprises sold more than CNY170 billion panda bonds last year, Pan Gongsheng, governor of the People’s Bank of China, said at the annual conference of the China Development Forum.

China’s low interest rates, the inversion of the interest rate differential between China and the United States, and the institutional opening-up of China’s bond market are the core reasons for the popularity of panda bonds, according to industry insiders.

The institutional opening-up of China’s bond market and capital account has made issuing panda bonds more attractive to foreign entities, Zhang Ming, deputy director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, said in an article.

The continuous advancement of the yuan internationalization has significantly hiked the genuine demand of foreign entities for yuan-denominated funds, he added.

The risk-free interest rate and credit spreads in China are relatively low, so the cost for foreign entities to issue panda bonds is lower than that of issuing bonds in the international market, said Guo Zairan, researcher at the fixed income department of CIB Research.

As investors, commercial banks can obtain excess returns by underwriting panda bonds, Guo noted, adding that after deducting the hedging costs, it may not be less advantageous than investing in foreign currency bonds.

The panda bond market is expected to expand further in the future, with more diversified market participants, according to a research report by CSCI Pengyuan Ratings. Market rules may be further aligned with international standards, and related innovative products may become more abundant.

Editor: Futura Costaglione