How we became the gateway to China’s bond market
In the 45 years since China opened its doors to foreign direct investment, all international eyes, ears and portfolios have been on how to tap into China’s bond market and all that one of the world’s most populous countries has to offer to investors.
But somewhere along the way, Luxembourg became China’s European destination of choice when it came to expanding its footprint in international capital markets, and along with it, so did the Luxembourg Stock Exchange (LuxSE) become international investors’ Gateway to China.
According to data analysed by the International Capital Markets Association and provided by Dealogic, Chinese international bond issuance reached USD 115 million in 2022.
China’s commitment to reach peak carbon emissions by 2030 and carbon neutrality by 2060 has also prompted a rapid expansion of the country's green bond market. According to figures from Climate Bonds Initiative, China is the second biggest market for green bond issuance in Q1 2023, after Germany.
The first international sovereign bond from the People’s Republic of China in 1994, first exchange in Europe to list a dim sum bond in 2011. These are just some of the firsts that our exchange has been a part of. Firsts that built metaphorical bridges between China and an international investor community that eagerly waited at the other side.
Dim sum bonds – meaning RMB denominated bonds issued outside of China – have played a key role in opening up China’s bond market and with 800+ RMB denominated bonds having now found their international home at LuxSE, this makes us the leading exchange for the listing of dim sum bonds outside of Asia.
Over the years, we have also signed numerous Memoranda of Understanding and Cooperation Agreements with our counterparts in Shanghai, Shenzhen and Macao to facilitate the dual listing of Chinese securities. These joint efforts have been crucial in opening up China’s bond market and solidifying our status as a Gateway to China as dual listing gives Chinese issuers the opportunity to showcase their bonds and the projects that they fund to international investors that look to our exchange when making their next investment decisions.
In 2016, LuxSE was the listing venue of the first green bond issued by a Chinese financial institution – Bank of China. Many will find it interesting to know that this listing happened before the launch of LGX so shows that the wheels were already in motion when it came to our work with China in this area.
From there, our cooperation within China’s bond market to spread the message of sustainable finance went from strength to strength. In 2018, we established the Green Bond Information Channel in cooperation with the Shanghai Stock Exchange before extending this Channel to include the Shenzhen Stock Exchange the following year.
This channel has been a crucial part of our commitment to opening up China’s bond market to international investors – especially to international investors looking to tap into China’s bond market in a sustainable way. This also led us to go on to create a similar information channel with Shanghai Clearing House in 2019, to cover Chinese domestic green bonds that are issued traded on the China Interbank Bond Market.
But it didn’t stop there. Adding to these China bond market information channels, we now also display 10 different Chinese green bond indices on our website through partnerships with institutions such as CUFE, SSE and CCDC.
But this must include a laser focus on decarbonising the world – something we cannot do without decarbonising capital markets.
China, as a key player in both international capital markets and the world’s economy as a whole has a crucial part to play in this decarbonisation – something that we are committed to help facilitate through the power of sustainable finance.
But somewhere along the way, Luxembourg became China’s European destination of choice when it came to expanding its footprint in international capital markets, and along with it, so did the Luxembourg Stock Exchange (LuxSE) become international investors’ Gateway to China.
An overview of China’s bond market
Home to the second largest bond market in the world, significant steps have been taken in recent years to showcase China’s growing economy, promote the internationalisation of RMB and facilitate global investors’ access to Chinese issuers.According to data analysed by the International Capital Markets Association and provided by Dealogic, Chinese international bond issuance reached USD 115 million in 2022.
China’s commitment to reach peak carbon emissions by 2030 and carbon neutrality by 2060 has also prompted a rapid expansion of the country's green bond market. According to figures from Climate Bonds Initiative, China is the second biggest market for green bond issuance in Q1 2023, after Germany.
China's bond market: Enhancing access to international investors
Our journey into the world of China’s bond market began in 1986, when LuxSE became the listing venue of the first international bond from the Bank of China. In the nearly 40 years that have come and gone since, we’ve had many firsts with a wide variety of China capital market players.The first international sovereign bond from the People’s Republic of China in 1994, first exchange in Europe to list a dim sum bond in 2011. These are just some of the firsts that our exchange has been a part of. Firsts that built metaphorical bridges between China and an international investor community that eagerly waited at the other side.
Dim sum bonds – meaning RMB denominated bonds issued outside of China – have played a key role in opening up China’s bond market and with 800+ RMB denominated bonds having now found their international home at LuxSE, this makes us the leading exchange for the listing of dim sum bonds outside of Asia.
Over the years, we have also signed numerous Memoranda of Understanding and Cooperation Agreements with our counterparts in Shanghai, Shenzhen and Macao to facilitate the dual listing of Chinese securities. These joint efforts have been crucial in opening up China’s bond market and solidifying our status as a Gateway to China as dual listing gives Chinese issuers the opportunity to showcase their bonds and the projects that they fund to international investors that look to our exchange when making their next investment decisions.
LuxSE, a global player in China’s bond market
As the home of the Luxembourg Green Exchange (LGX), the world’s leading platform dedicated to sustainable finance, it was only a matter of time before our work in supporting China’s bond market expanding to take on a more sustainable focus.In 2016, LuxSE was the listing venue of the first green bond issued by a Chinese financial institution – Bank of China. Many will find it interesting to know that this listing happened before the launch of LGX so shows that the wheels were already in motion when it came to our work with China in this area.
From there, our cooperation within China’s bond market to spread the message of sustainable finance went from strength to strength. In 2018, we established the Green Bond Information Channel in cooperation with the Shanghai Stock Exchange before extending this Channel to include the Shenzhen Stock Exchange the following year.
This channel has been a crucial part of our commitment to opening up China’s bond market to international investors – especially to international investors looking to tap into China’s bond market in a sustainable way. This also led us to go on to create a similar information channel with Shanghai Clearing House in 2019, to cover Chinese domestic green bonds that are issued traded on the China Interbank Bond Market.
But it didn’t stop there. Adding to these China bond market information channels, we now also display 10 different Chinese green bond indices on our website through partnerships with institutions such as CUFE, SSE and CCDC.
What's next for LuxSE and China's bond market?
As for what comes next, LuxSE will continue to play an important role in making Luxembourg’s financial centre a destination of choice for Chinese entities during the next 40 years and beyond.But this must include a laser focus on decarbonising the world – something we cannot do without decarbonising capital markets.
China, as a key player in both international capital markets and the world’s economy as a whole has a crucial part to play in this decarbonisation – something that we are committed to help facilitate through the power of sustainable finance.
