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China is preparing to reopen its bond market to major Russian energy companies, signaling deepening diplomatic and economic ties between Beijing and Moscow, the Financial Times reported, citing sources, according to Ukrinform.
According to people familiar with the matter, at a late-August meeting in the Chinese city of Guangzhou, senior officials from China’s financial regulators told executives of Russian energy companies that they would support their plans to issue “Panda bonds” denominated in yuan.
This would mark the first time Russian companies have raised funds in China since Russia’s full-scale invasion of Ukraine, as well as the first sale of Russian debt instruments in China’s domestic market since aluminum producer Rusal issued Panda bonds in 2017, raising a total of 1.5 billion yuan.
Sweeping U.S. and EU sanctions have cut Russia off from global financial markets since 2022, while Chinese banks have avoided public financing deals involving Russian companies over fears of secondary sanctions.
The yuan has become an increasingly important foreign currency for Russia’s sanction-hit economy. In 2022, Russian companies began issuing yuan-denominated bonds on the domestic market, with most such securities coming from a small group of companies, including Rusal and Gazprom.
According to FT’s sources, the revival of Russian Panda bonds will likely be limited at first to two or three companies. It was expected that Russia’s state-owned corporation Rosatom and its subsidiaries, which are not under broad Western sanctions, would be among the first borrowers to tap into the world’s second-largest bond market.
One possible workaround discussed was issuing Panda bonds through Russian companies not currently sanctioned. However, there was a risk that these companies could be targeted by sanctions after selling the debt.
On Friday, Gazprom, which has been under U.S. sanctions since 2022, received an important AAA rating with a stable outlook from Chinese credit agency CSCI Pengyuan. A strong credit rating is a prerequisite for foreign companies to access China’s domestic bond market.
An increasing number of major Russian energy firms are obtaining Chinese credit ratings, the FT noted. These include Atomenergoprom, a subsidiary of Rosatom; leading LNG supplier Novatek; and Zarubezhneft.
As reported earlier, the Chinese government is also introducing a trial visa-free regime for Russian citizens, valid for one year.
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