On Friday, B.C. became one of the first foreign government jurisdictions to issue bonds in China’s domestic market, raising roughly 3 billion renminbi (RMB) or $665 million And the province is likely far from finished.

According to Finance Minister Mike de Jong, the province will continue to pursue opportunities beyond its borders to diversify its borrowing portfolio, noting the more markets the province taps into, the more affordable borrowing costs will be.

De Jong, who was in Beijing to witness the “book-building” procedure of the new Panda bond by lead underwriters HSBC and the Bank of China, said at the official kickoff at the Beijing Financial Assets Exchange that the agreement with Chinese regulators meant B.C. can only offer 3 billion RMB in bonds at any one time.

Given the fact that the B.C.-China Panda bond agreement is for a total of 6 billion RMB over the next two years, it is almost certain that B.C. will issue another wave of Panda bonds within that time to take advantage of the 3 billion RMB capacity remaining. And when that happens, there will almost certainly be no shortage of Chinese takers, given the drops in the Shanghai and Shenzhen stock indexes, which have led investors to look elsewhere to park their assets.

Part of that demand was already obvious during the first Panda-bond wave as the B.C. bond was almost “twice oversubscribed,” which means demand for the B.C.-issued bond was almost double the supply on the market.

“There had been considerable enthusiasm (from Chinese investors) in B.C. before, to be sure,” de Jong said. “But the type of fluctuation we see in the stock markets no doubt drew people to the stable bond market. It makes B.C.’s Panda bond a very attractive option.”

B.C. was also the first government entity outside China, in 2013, to issue the Dim Sum bond, or offshore bonds sold under the denomination of the Chinese currency renminbi.

The Panda bond is an onshore bond sold in the Chinese domestic market, meaning more investors can make the purchase. The only other foreign government entity to sell Panda bonds so far is South Korea, and de Jong said B.C. was able to secure a better rate due to its triple-A credit rating.

“We are very, very pleased. … You have to understand that, two, three months ago, you couldn’t do this,” de Jong said. “

“The appetite for B.C. bonds (in China) was twice what we were able to accommodate, and it speaks to B.C.’s reputation as a stable economy and an ideal location to do business.”

B.C. officials added that the Panda bond is part of a continuing process of expanding the province’s bond portfolio. It already has similar issues in Europe and the United States, and introduced one in the Australian market in recent years.

The next target market — which fits into almost every conversation, either provincially or federally, when it comes to Canada’s Asia strategy — is India, de Jong said. The timing of that, as well as the second wave of the Panda bond, has not been announced.

Officials said the proceeds from the bond issue on Friday were reinvested in an RMB-denominated instrument with Singapore-based United Overseas Bank, adding that the investment will return gains for B. C. taxpayers because the rate-of-return on the investment is higher than the 2.95 per cent payout rate of the bond of Chinese bondholders.

“We can use the financial gains here to finance our trade offices in China or other trade or promotional initiatives,” de Jong said. “Without it, we would have had to draw on other government funds. … And in addition to that, there’s the reputational advantage for B.C., which is very, very significant.”

The previous offshore Dim Sum bond issue raised almost $1 billion for the province.

chchiang@vancouversun.com

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