(Yicai) Oct. 27 -- Against the backdrop of a sustained inverted interest rate spread between China and the United States, Chinese companies have shifted their top offshore financing choice from US dollar bonds to cheaper offshore Chinese yuan-denominated bonds, commonly known as dim sum bonds.

China’s dim sum bond issuance reached CNY1.05 trillion (USD157.5 billion) so far this year as of Oct. 15, surpassing last year’s total, according to data compiled by Bloomberg. The scale will reach a new historic high in 2026, after exceeding CNY1 trillion in both 2024 and 2025.

Dim sum bonds serve as the market benchmark for offshore Chinese yuan bonds. Hong Kong is the primary issuance venue, with additional listings in major global financial hubs, including Singapore and London.

Top issuers this year include technology firms and large state-owned enterprises such as Tencent Holdings, JD.Com, SF Express, and State Grid Corporation of China, Perry Kojodjojo, Asia macro rate strategist at Deutsche Bank, told Yicai.

Sovereign and international issuers, including Indonesia and the Asian Infrastructure Investment Bank, also account for a rising share of dim sum bond issuance. “Together, they contribute more than one-third of the total volume, compared with less than 20 percent in 2024,” Kojodjojo noted.

“High borrowing costs on US dollar bonds have pushed a broader range of issuers toward cheaper financing channels,” said Li Zihao, Asia credit strategist at Bloomberg Intelligence.

The China-US interest rate gap has widened to an all-time high. The 10-year treasury bond spread between the US dollar and the Chinese yuan has inverted by more than 300 basis points, peaking at about 360 basis points in early October. Newly issued dim sum bonds now carry coupon rates of only 1.4 percent to 2.4 percent, while those of US dollar bonds stand at around 4.78 percent.

For example, Tencent this month issued a 10-year US dollar bond with a coupon rate of 6.1 percent and a 20-year US dollar bond with a coupon rate of 6.75 percent, as well as a 10-year and a 30-year dim sum bond with coupon rates of 2.4 percent and 3 percent, respectively.

“That said, the current surge in dim sum bond issuance is not driven solely by the interest rate spread,” Kojodjojo pointed out. “Diversified financing needs among companies and institutional clients are also key supporting factors.”

In fact, he explained to Yicai that the dim sum bond market is evolving into a deeper, more mature financing venue, serving as a major growth driver for the offshore yuan financing ecosystem.

The dim sum bond market boom will persist long-term, Deutsche Bank predicted. Beyond the cost advantage from the China-US interest rate spread, the expansion of the Southbound Bond Connect channel has also enabled large volumes of onshore long-term capital to purchase offshore yuan bonds in Hong Kong, directly lifting investor demand.

Editors: Tang Shihua, Futura Costaglione