China issued a renminbi-denominated sovereign green bond on the London Stock Exchange on Thursday, marking its first overseas issuance of such a bond.
The 6-billion-yuan ($825-million) deal comes in two parts: a 3-billion-yuan bond with a three-year term at an interest rate of 1.88 percent, and another 3-billion-yuan bond with a five-year maturity at an interest rate of 1.93 percent.
Both rates are lower than the yields on comparable treasury bonds in the secondary market in the Hong Kong Special Administrative Region.
The London offering spurred strong demand from international investors, with total subscriptions hitting 41.58 billion yuan, 6.9 times the issuance value. Orders from green and sustainable-focused investors made up about 22 percent of the total order book.
A Chinese global bond, especially one issued in London, one of the world”s major financial centers, had been long anticipated, given China’s economic stature, Reuters reported on Tuesday, ahead of the listing.
Speaking at the issuance ceremony, Vice-Minister of Finance Liao Min said the debut of China’s sovereign green bonds in London marked an important step in implementing the consensus reached between President Xi Jinping and United Kingdom Prime Minister Keir Starmer and was a major policy outcome of the 11th China-UK Economic and Financial Dialogue held in January.
When asked about the warmer tone of China-UK relations, Liao told the Financial Times: “There are always ups and downs … This is a very sort of win-win situation for both sides. I’m quite optimistic about our cooperation in economic and financial areas.”
Liao also revealed that China is thinking about expanding “the scope, the currencies, and locations” of green bond issuance.
China’s Ambassador to the UK Zheng Zeguang said the issuance was a “testament to China’s commitment to green and low-carbon developments”.
“China has made a solemn commitment to peak carbon emissions by 2030 and achieve carbon neutrality by 2060. During this year’s two sessions, it was emphasized that China will work to reduce carbon emissions, cut pollution, and promote green growth,” he said. “This is what we say, and this is also what we are doing.”
The bonds were issued under a framework released by the Ministry of Finance in February, which lays the foundation for China to issue offshore sovereign green bonds and allows global capital to invest in its green development.
The funds raised through the green bonds under the framework will be allocated to eligible green projects included in the central fiscal budget.
UK Economic Secretary to the Treasury Emma Reynolds, Executive Vice-President at Bank of China Zhang Xiaodong, CEO of the International Capital Market Association Bryan Pascoe, and Group Chairman of Standard Chartered Jose Vinals were also among the key guests attending the listing ceremony.
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