A view of Shanghai Photo: VCG

China's capital market supports the goals of "decarbonization, adaptation, and resilience" internationally as it emerges as a growing channel for global climate finance through the sale of Panda bonds - yuan-denominated bonds issued by overseas institutions in China's capital market - and Dim Sum bonds, yuan-denominated bonds issued outside the Chinese mainland, according to a report by the London-based Climate Bonds Initiative (CBI) sent to the Global Times on Tuesday. 

China's cross-border yuan bond market is becoming an increasingly important channel for global climate finance, Chinese analysts said. As Panda bonds and Dim Sum bonds continue to develop, they are offering overseas issuers, especially sovereigns, multilateral lenders and large corporations, a potentially lower-cost and more diversified approach to fund green and transition projects. 

The report showed that the scale of yuan-denominated green, social, sustainability, and sustainability linked (GSS+) bonds, particularly Panda and Dim Sum bonds, has been increasing. Since the first green Panda bond was issued in 2016 and the first green Dim Sum bond in 2019, both markets have expanded steadily.

As of the end of 2025, GSS+ bonds accounted for 6 percent of total Panda bonds that had been issued, reaching 64.2 billion yuan ($9.5 billion). Of the total, 84 percent were aligned with the Climate Bonds methodology, a standard the organization uses to define sustainable finance. The GSS+ Dim Sum market is considerably larger, with cumulative issuance reaching 328 billion yuan, of which 253.3 billion was considered to be aligned with the Climate Bonds methodology.

While GSS+ bonds still represent a relatively small share of total Panda and Dim Sum bond issuance, their growth signals a structural shift. Sustainable finance is becoming embedded in the cross-border yuan capital markets rather than remaining a niche segment, the report stressed. 

"Yuan-denominated GSS+ bonds are moving beyond a niche market and emerging as a credible financing channel for emerging markets and developing economies. Landmark transactions by Global South sovereign issuers such as Egypt, as well as international corporations such as Suzano, demonstrate that the market is becoming accessible to a broader range of issuers," Xie Wenhong, head of the China Programme of the CBI, told the Global Times on Tuesday. 

While Panda bonds connect foreign issuers to China's onshore investor base, Dim Sum bonds offer offshore yuan access through the Hong Kong Special Administrative Region and a more international investor mix. Besides, Free Trade Zone (FTZ) bonds are emerging as a hybrid channel that could bridge onshore policy priorities with offshore-style structuring and investor participation, according to the report.

China's continued opening of its bond market is creating an additional pool of capital for global climate finance, while also offering a potentially lower-cost alternative to euro- and US dollar-denominated financing, Xie said. 

"Panda bonds, Dim Sum bonds and FTZ bonds serve the differentiated financing needs of international borrowers, including a growing number from emerging markets, while China's domestic GSS+ bond market offers depth, liquidity and access to an increasingly sophisticated investor base," Xie said.

According to Xie, this creates a mutually reinforcing opportunity: International issuers can diversify their funding sources, while Chinese investors gain greater access to high-quality sustainable assets globally. The opportunity is particularly relevant for emerging-market issuers that are deepening trade and investment ties with China and can benefit from China's sustained support for green transition as part of their own domestic development agendas.

Green bonds dominate across both the Panda and Dim Sum bond markets, accounting for about 60-64 percent of total GSS+ volume, followed by sustainability bonds with approximately 30 percent, according to the report. 

As to the role of the yuan-denominated Chinese capital market in global climate financing, Xie noted particular potential in the combination of yuan financing with China's strengths in renewable-energy manufacturing and green supply chains.

"As Chinese solar, battery, electric vehicle and grid technologies are deployed globally, yuan-denominated sustainable finance could increasingly help finance the same transition that these technologies enable," Xie said.

Panda and Dim Sum bonds are becoming an important bridge between China's capital markets and global sustainable finance. Their growth reflects not only rising issuance, but also the deeper integration of sustainability into cross-border yuan financing, according to Sean Kidney, co-founder and CEO of the CBI.

"Achieving global net-zero goals requires mobilizing sustainable capital across borders at an unprecedented scale, yet many transition economies continue to face high borrowing costs and acute financing constraints. Yuan-denominated GSS+ instruments are maturing into vital cross-border corridors that bridge this gap," Ma Jun, president of the Institute of Finance and Sustainability and chairperson of the Capacity-building Alliance of Sustainable Investment, told the Global Times on Tuesday.

Higher-quality sovereigns, multilateral development banks and large corporations may be able to raise funds in the yuan market at lower costs than in the US dollar market under suitable conditions, while also diversifying funding sources and managing foreign-exchange risks, Ma said.

Ma noted that Panda bond issuance in the first half of this year rose nearly 70 percent year-on-year, and the yuan GSS+ market is likely to keep expanding over the next three to five years, driven by the advancement of yuan internationalization and rising green transition financing demand from Global South economies.

The market could broaden beyond green bonds to include transition bonds, sustainability linked bonds and other innovative instruments, especially if combined with credit enhancement and blended-finance mechanisms, Ma said.

Citing improvements in China's cross-border bond market framework, including more detailed rules for Panda bonds, Dim Sum bonds and FTZ offshore bonds, Ming Ming, chief economist at CITIC Securities, told the Global Times on Tuesday that the country is building a more complete policy system for cross-border yuan financing. 

"China's green bond market could become an important bridge that links developing countries to global climate funds, particularly for green infrastructure, renewable energy and low-carbon transport projects along the Belt and Road," Ming said.

As global climate financing increasingly looks beyond traditional dollar- and euro-denominated markets, China's yuan bond market is emerging as a new source of capital for international issuers seeking green, diversified and potentially lower-cost funding, Ming noted.