China unexpectedly issues debt in USD, quite unusual location, why did Beijing choose that?

China is offering dollar-denominated bonds in Saudi Arabia, marking the country's first greenback-denominated debt issuance since 2021.

China issues first dollar bonds in three years. (Source: Reuters)

Bloomberg quoted sources familiar with the matter as saying that the bonds offered will have maturities of three and five years, with initial yields expected to be about 25 basis points and 30 basis points higher than the corresponding US Treasury bond yields.

China's Ministry of Finance announced plans to issue up to $2 billion in bonds earlier this month.

According to observers, the choice of Saudi Arabia as the issuance location is quite unusual, because similar transactions are usually conducted in London, New York and Hong Kong (China).

The decision follows recent efforts to boost economic ties between the two countries. Officials from both sides met earlier this year to discuss cooperation prospects.

The warming bilateral relationship is also reflected in moves such as China's largest steelmaker doubling its investment in Saudi Arabia.

Ms. Ting Meng, senior credit strategist for Asia at Australia & New Zealand Banking Group (ANZ), commented that the above development is consistent with the increasingly developing relationship between the two countries.

The bond is similar in form to previous issues, but could attract more Middle Eastern investors.

The bonds will be traded on the Nasdaq Dubai and listed on the Hong Kong Stock Exchange.

In recent months, the world's second-largest economy has announced plans to support its struggling economy.

Last week, China’s finance ministry announced a $1.4 trillion bailout package for debt-laden local governments, but the country has yet to take further steps to stimulate domestic demand.

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