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Jul 29, 2018

The $500 billion market the world never thought it would see I GATA I THE GATA DISPATCH

The $500 billion market the world never thought it would see

Submitted by cpowell on 01:43AM ET Monday, July 30, 2018. Section: Daily Dispatches By Chris Anstey and Narae Kim
Bloomberg News
Sunday, July 29, 2018
China used to rail against the outsize role of the U.S. dollar. But in a major turnaround, the world's second-biggest economy has started embracing the currency of its larger rival.
Chinese companies and banks -- and even the government -- sold bonds denominated in dollars at a record pace last year, and underwriters expect that growth to continue for years. The roughly half-trillion-dollar market has two key attractions for China's borrowers. For some, it's an easier place to raise cash than at home -- where regulators are cracking down on leverage. For others, dollars are simply easier to use to fund acquisitions and investments abroad.

The upshot: There's a large and growing supply of dollar securities that offer exposure to Chinese companies for investors wary of diving into the country's increasingly accessible yuan -- denominated domestic debt. The offshore bond market is also set to provide a stake in President Xi Jinping's "Belt and Road" initiative (BRI) -- a grand plan that envisions deepening trade and investment ties with countries across the Eurasian landmass and beyond. Bankers see the BRI as a key source of growth in Chinese dollar bonds. ...

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