A concept photo of the financial market Illustration: VCG

From Brazil in South America to Kazakhstan in Central Asia, a growing number of countries are turning their attention to China's bond market and rushing to issue a special type of bond - panda bonds.

In June, Brazil's Finance Ministry submitted plans for issuing inaugural sovereign panda bonds, making it the first Latin American nation to embrace the yuan-denominated financial instrument, a release from the People's Bank of China (PBC), the central bank, read.

In May, the Ministry of Finance of Kazakhstan completed its sovereign panda bonds issuance of 3.4 billion yuan in China, marking a crucial step to diversify its funding sources, Astana International Exchange noted in a release then.

In the first half of 2026, total panda bonds issuances surged by 60 percent year-on-year, exceeding 160 billion yuan ($23 billion) in total sum, according to statistics from the PBC.

Behind this rapidly rising popularity lie many thought-provoking questions: What exactly are panda bonds? What has driven the bonds' explosive growth? And what far-reaching impacts will this financial trend bring to China's financial opening-up and the internationalization of Chinese yuan?

Decoding panda bonds

The moment people hear the term panda bond, they instinctively associate it with China's national treasure, the giant panda. Yet behind the gentle and well-known name lies a professional and sophisticated international financial mechanism.

Simply put, panda bonds are yuan-denominated bonds issued by overseas institutions in China's capital market. Following international conventions, such bonds are named after national symbols. Panda bonds were first launched in September 2005. The three main categories of issuers are international development institutions, foreign government-related entities, and overseas non-financial enterprises, according to the introduction of panda bonds on the website of National Association of Financial Market Institutional Investors.

The panda bonds are expected to gain pace continuously in the global market thanks to China's deepening financial opening-up and the progress of yuan internationalization.

Today, panda bond issuers have become highly diversified, covering a wide range of global purchasers. They include sovereign governments such as Hungary, Slovenia and Kazakhstan, multilateral development institutions including the Asian Development Bank, the Asian Infrastructure Investment Bank and the New Development Bank, top global financial institutions like Deutsche Bank, Crédit Agricole, National Bank of Canada, Morgan Stanley and United Overseas Bank, as well as multinational companies including Mercedes-Benz and Bayer, the People's Daily reported.

In the first five months of 2026, 17 new overseas institutions gained access to China's interbank bond market, which helped enrich the market participant ecosystem, according to the report.

The explosive growth of panda bonds is not accidental. Booming cross-border trade and investment have generated massive real-world demand for yuan settlement and financing, laying a solid foundation for the prosperity of the panda bonds market, a Chinese financial expert said.

"Generally speaking, overseas issuers raise yuan funds through issuing panda bonds, while global investors allocate their yuan holdings to these bonds. This forms a sound, self-reinforcing and sustainable market ecosystem," Xi Junyang, a professor at Shanghai University of Finance and Economics, told the Global Times on Sunday.

For foreign governments and enterprises, panda bonds serve as a stable and reliable yuan financing channel.

Unlike traditional US dollar settlement, which comes with volatile exchange rate risks, additional currency conversion fees, and high transaction costs, panda bonds offer a direct, low-cost yuan financing solution for the economies that have formed close economic ties with China, filling a key market gap, the expert said.

"From a monetary point of view, it is important to note the increase in commercial contracts signed in yuan, which reduces transaction costs and settlement time," Marcos Cordeiro Pires, a professor at the Department of Political and Economic Sciences, São Paulo State University, Brazil, told the Global Times on Sunday.

"Recently, the Brazilian government negotiated with China the issuance of more panda bonds denominated in yuan. With this, Brazil seeks to diversify its debt financing structure, trying to reduce its exposure to US political and economic volatility," he noted.

Another practical driver behind the boom is China's relatively low interest rate environment. Zhao Qingming, a veteran financial industry expert, told the Global Times that financing via panda bonds is cheaper than borrowing in US dollars, euros and other major global currencies.

Sustained high interest rates in the US have sharply pushed up the cost of the dollar bond financing. Against this backdrop, global financial institutions are actively choosing panda bonds to secure low-cost yuan capital - the primary catalyst for the market's rapid expansion, Zhao said.

Yuan internationalization

The prosperity of the panda bonds market is an epitome of China's high-standard financial sector opening-up.

China has continuously improved its fundamental rules covering market access, information disclosure, accounting standards and fund management. These reforms have sharpened the appeal of China's onshore yuan bond market and consolidated long-term confidence among global institutional investors, Xi Junyang said.

Panda bonds have become an important driver of the yuan internationalization. This creates a virtuous cycle. As yuan gains wider global recognition, offshore yuan liquidity will expand. This in turn will generate stronger demand for cross-border yuan financing, investment and capital turnover, further enlarging the panda bond market and deepening yuan's integration into the global financial system, the expert noted.

During a keynote speech at China Development Forum in March, Pan Gongsheng, governor of the People's Bank of China, noted that China will continue to improve the institutional framework and financial infrastructure that will benefit cross-border yuan transactions, advance diversified financial and monetary cooperation, foster a vibrant offshore yuan market, and bring greater convenience to cross-border trade, investment and financing that are settled in Chinese yuan.

The panda bonds market structure has kept on optimizing. In 2025, medium and long-term panda bonds issuance accounted for 61 percent of the total bond volume, up 17 percentage points from 2021. This data clearly reflects overseas issuers' long-term confidence in China's economic and financial market prospects, according to the People's Daily.

The rise of Chinese yuan as a key international currency represents a significant untapped opportunity for global finance. The yuan's prominence continues to grow as the currency landscape becomes increasingly diversified, said Standard Chartered in a research paper in March.

For financial institutions seeking to diversify their portfolios and strengthen competitive positioning, Chinese yuan has become a strategic component now, Standard Chartered said.