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China Dollar Bonds Make Strong Debut in Saudi Arabia After Three-Year Hiatus

China dollar bonds return to the market for the first time since 2021, attracting strong investor demand in Saudi Arabia, marking closer China-Middle East economic ties.

China has re-entered the dollar bond market, marking its first issuance of China dollar bonds since 2021. Unusually, this sale is taking place in Saudi Arabia, a venue not typically associated with such transactions, which are often held in global financial centers like London, New York, or Hong Kong. This unique move not only underscores China’s expanding financial strategy but also highlights its deepening ties with the Middle East. According to sources familiar with the sale, the three-year and five-year China dollar bonds have an initial price guidance of approximately 25 and 30 basis points above comparable US Treasury yields.

Strong Investor Demand for China Dollar Bonds

Earlier in November, China’s Ministry of Finance confirmed plans to raise up to $2 billion through these dollar-denominated notes, sparking high interest among investors. By Wednesday morning, orders had already exceeded $25.7 billion—a testament to the strong demand for China dollar bonds. This level of investor enthusiasm reflects confidence in China’s economic stability and its appeal to international investors. The bonds are expected to trade on Nasdaq Dubai and list on the Hong Kong exchange, widening the global accessibility of China’s financial instruments.

This issuance also follows China’s September bond sale in Paris, where it issued 2 billion euros in bonds, marking its first euro-denominated sale in three years. Together, these moves indicate that China is actively engaging with global capital markets, both to attract international capital and to signal economic stability amid domestic challenges.

Strengthening China-Middle East Economic Relations

China’s choice of Saudi Arabia as the venue for issuing China dollar bonds highlights a shift in economic strategy. In recent years, China has been steadily building ties with Middle Eastern nations, particularly Saudi Arabia. Earlier this year, high-level officials from both countries met to discuss economic cooperation, resulting in a significant increase in Chinese investments in Saudi Arabia, including a doubling of investment from China’s largest steel producer.

Ting Meng, senior Asia credit strategist at Australia & New Zealand Banking Group, commented on the strategic choice, noting that “the bond sale could attract more Middle Eastern investors and may even price at or below US Treasury yields.” Such a move reflects the alignment of economic interests between China and the Middle East, where the appetite for China dollar bonds has been growing due to rising trade and investment flows.

By choosing Saudi Arabia, China may also be aiming to attract a broader base of Middle Eastern investors, who have shown increased interest in diversifying their portfolios into stable foreign assets. This could set the stage for future China dollar bonds sales in the region, further strengthening China’s financial and economic partnerships with Middle Eastern economies.

China’s Global Debt Market Strategy

This new issuance of China dollar bonds forms part of China’s wider strategy to address its economic challenges. As its domestic economy faces headwinds, China has rolled out initiatives to stabilize key sectors, such as a $1.4 trillion bailout for debt-laden local governments. However, the Ministry of Finance has been cautious about enacting broad stimulus measures aimed at boosting domestic demand, focusing instead on targeted support that maintains fiscal responsibility.

In addition to the dollar-denominated bonds issued in Saudi Arabia, China’s euro-denominated bond issuance in Paris this past September reflects a commitment to diversified funding sources. By tapping into both the dollar and euro markets, China is positioning itself to remain resilient amidst global economic shifts, providing options for international investors interested in reliable returns from China dollar bonds.

Future of China Dollar Bonds in the Middle East

With this landmark issuance in Saudi Arabia, China dollar bonds are likely to become a more prominent part of the Middle Eastern investment landscape. The choice of Saudi Arabia as a venue signals potential for future bond sales in the region, with China expected to continue exploring partnerships that align with its long-term economic and geopolitical objectives.

As China continues to strengthen its financial ties globally, particularly with emerging markets in the Middle East, China dollar bonds are set to play an important role. This issuance not only highlights a deepening of China’s bond market strategy but also showcases its intent to foster strong economic relationships that support its global financial goals.