The logo of China's tech giant Huawei. Photo: Xinhua

Huawei will issue its second medium-term note (MTN) worth 3 billion yuan ($426 million) on Tuesday and Wednesday, and the securities will be ready for retrieval in three years, according to the Shanghai Clearing House. 

Analysts say that Huawei is now increasingly turning to domestic financing, which is safer and cheaper.

Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, said that the financing risks overseas for Huawei is growing amid US government's blacklisting the Chinese technology giant. 

"US trade ban on Huawei has unnerved many foreign banks while giving a credit line to the Chinese company, which has made overseas financing procedures increasingly complicated, adding to difficulty for Huawei to applying for capital through foreign lenders," Xiang told the Global Times on Sunday.

As a result, Huawei is turning to domestic financing, said the analyst. Xiang also noted that the cost of foreign financing is higher, and the procedures are more complicated. 

"In the past, the financing cost abroad was comparatively lower, and it was natural for Huawei to raise funds through foreign banks. Now it is easier and cheaper for Huawei to raise funds at home," Xiang said.

Huawei has 253.2 billion yuan cash on its books and its financial assets increased more than 100 billion yuan in 2019 from a year ago, according to Huawei's third quarter financial report released on October 30. 

Xiang said that Huawei has abundant cash flow and the 3 billion MTN is a small amount of money for the company.

The proceeds from the issuance of 3 billion yuan MTN will be used to supplement the operational capital at Huawei's headquarters and subsidiaries as the company's business is witnessing a steady growth in the future and the capital expenditure will increase, said Huawei in a statement.

"Bank loans need collateral, while bonds are generally creditworthy and flexible. At present, the interest rate of domestic bonds is very low, and it will benefit the tech company," a China Construction Bank underwriter working in a Beijing branch surnamed Li told the Global Times on Sunday.

According to the credit rating announcement, the principal long-term credit rating of Huawei was rated AAA by China Lianhe Credit Rating Co, and its MTN was also rated AAA, with a stable outlook.

The second issue of MTN came after Huawei's first issue of 3 billion yuan on October 22, which attracted a scramble of 9.23 billion yuan offerings, the Xinhua News Agency reported on Saturday. 

The interest rate for the first issuance was 3.48 percent, which shows Chinese market's vehement support for Huawei, said Chinese insiders.