In 2024, international bond issuance from Chinese issuers have reached USD141 billion, a 29% year-over-year increase, according to a report published by International Capital Market Association.1 The China offshore USD bond new issuance rose to approximately USD88.5 billion in 2024, representing a year-on-year growth of 42%,2 attributed by more favorable financing conditions and strong refinancing needs, as well as the interest rate differential between China and the United States of America (US). Following the rate cuts by the Federal Reserve System in the US in September 2024, Chinese offshore bond issuance rebounded in 2024 and continues in 2025.
Local government financing vehicles (LGFVs) is a key driver of such growth. These companies are government-established entities designed to facilitate infrastructure development, manage state assets and implement local policies which are crucial for regional economic growth and play a significant role in China's urbanization and development. In 2024, the amount of their offshore bond issuance reached to USD55.8 billion, a 73.6% year-on-year increase in 2024, according to CSPI Ratings.
An increasing number of the China offshore USD bonds are listed on Chongwa (Macao) Financial Asset Exchange (also known as the MOX), a Macau financial exchange platform established in 2018 to facilitate the trading and issuance of various financial products, including bonds, securities, and other asset-backed securities, within the region. The bond listing procedure and process in the MOX is rather streamlined, involving submission of application together with basic corporate documents and materials, which will be reviewed by the MOX, which will approve if the documents submitted are in order. As of 30 April this year, the total value of bonds issued and listed on MOX had reached 909.253 billion patacas (about US$113.9 billion US dollars), and the MOX's bond listing business saw a year-on-year growth of 25.7%.
British Virgin Islands (BVI) and Cayman Islands companies have been popular as bond issuers, especially for Asia-based companies, for a number of reasons, such as their speed of incorporation and rather low incorporation fee, and these jurisdictions, operating as offshore financial centres, having reliable legal system based on English common law, supplemented by a modern, commercial and flexible statutory framework, being tax neutral (with interest and principal being paid free of withholding taxes, and gains derived from the disposal of the bonds not being subject to any capital gains, income or corporation tax in the BVI or the Cayman Islands), and therefore providing a robust and flexible companies structure. Also, if the issuer has already listed its bonds on the Hong Kong Stock Exchange, its listing approval may be relied on and the MOX bond listing approval process may therefore speed up.
Appleby has recently acted as British Virgin Islands (BVI) legal counsel to Wuxing Industry Investment Husheng Company Limited and guaranteed by Huzhou Wuxing Talent Industry Investment and Development Group Co., Ltd (overseen by Wuxing District SCSASC through Wuxing State-Owned Capital Investment Development) in connection with the issuance and listing of USD 148 million 6.50% guaranteed bonds, and Xin Fu (BVI) Co., Limited in connection with the issuance and listing of USD 80 million 6.50% guaranteed bonds guaranteed by Taizhou Xintai Group Co., Ltd. (泰州鑫泰集团有限公司) and Taizhou Guokong Investment Group Co., Ltd. (泰州国控投资集团有限公司), being a leading investment, financing and operating platform for urban development in Taizhou City, Jiangsu Province. Both bonds are listed on the MOX.
Footnotes
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