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China sells first dollar bond in more than a decade Landmark sale comes in same week as Communist party congress y f in & as & | saveromyer OCTOBER 28,2017 by Gabriel illdau in Shanghal China sold its first bond in dollars for more than a decade in a move the government hopes will lower borrowing costs for the country’s companies, Coming a day after the Communist party congress entrenched Xi Jinping’s position as leader, China sold a combined $2bn of five and 10-year bonds at yields little higher than US Treasuries. “The finance ministry will be pretty happy about this,” said Owen Gallimore, Asia credit strategist at Australia and New Zealand Bank in Singapore, who believes the bonds merited even lower yields. “They could have just forced Chinese state investors to buy and held the yield flat to [US] Treasuries or even below. But by offering more attractive pricing, they can draw in strong interest from international investors,” said Mr Gallimore. China issues the majority of its debt in renminbi to onshore investors, so the sale of the dollar debt in Hong Kong also carried a symbolic value. The finance ministry had. ‘$18bn in foreign debt outstanding at the end of last year, worth only 1 per cent of total government debt. Of that total, 85 per cent was offshore renminbi debt. ‘The five-year bonds priced at a yield of 15 basis points above Treasuries of the same maturity and 10-year bonds at 25 bps above, according to a term sheet seen by the Financial ‘Times. The yield on both tranches was lower than initial guidance in a further sign of strong demand. ‘The implied yield on the bonds is lower than that of sovereigns with similar credit ratings. Chilean government dollar bonds maturing in five years yield 2.37 per cent. Moody's rates Chile at A-plus, the same level as China, while S&P rates Chile one notch higher but with a negative outlook. ‘The finance ministry said this week that its sale was intended to set a benchmark against which Chinese companies — prolific issuers in Hong Kong's US dollar debt market — can price their bonds, potentially allowing them to sell at lower rates. It also reiterated criticism of western rating agencies for “misunderstanding” China. China’s sovereign credit ratings were downgraded this year by both Moody's and Standard & Poor's. China's economy has grown faster than expected this year, and the country’s debt burden has stabilised — or even fallen by some estimates — due to slower credit growth and faster inflation. China sold $6.7bn in US dollar debt in 12 sales between 1993 and 2004, according to Shenwan Hongyuan Securities, but has not sold non-renminbi debt since then. HSBC, Standard Chartered, Deutsche Bank, Citibank, China International Capital Corp, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, and Bank of China were joint lead managers and book runners on the deal. “This issuance demonstrates Chin; commitment to engaging international investors as it transforms its economy, opens its capital markets and strengthens its global connections through the Belt and Road Initiative,” Peter Wong, chief executive of HSBC Asia, said in a statement, referring to China’s ambitious plan to build infrastructure links throughout the developing world.