Shenzhen government to raise US$964 million with ‘dim sum’ bond issue in Hong Kong

The Shenzhen government will issue up to 7 billion yuan (US$964.4 million) worth of so-called dim sum bonds – yuan-­denominated offshore bonds – in Hong Kong, according to a statement on Monday.

The offering, the fourth such issuance in the last four years, is also the largest, bringing the total funds raised by the Shenzhen government in Hong Kong to 22 billion yuan, after offerings in 2021, 2022 and 2023 raised 5 billion yuan each.

For the first time, the bond offering will include a tranche with a 10-year tenure, while also matching the two-, three- and five-year tranches of the previous issuances, the statement of the government website said.

Timing and other details will be announced later, but the Shenzhen government on Monday announced the appointment of 29 banks as underwriters of the bond offerings, including all three note-issuing banks in Hong Kong – HSBC, Standard Chartered and Bank of China (Hong Kong) – alongside international players such as Citigroup, Morgan Stanley and JPMorgan.

The Shenzhen government said the offering is aimed at “promoting the connections in the financial markets in the Greater Bay Area”, and the funds raised will power a wide range of projects.

The two-year tranches will be used for establishing facilities for secondary schools, while the three-year bonds will be green bonds to invest in underground trains and other infrastructure to help cut carbon emissions.

The five-year bonds will raise funds for train and railway facilities, and the 10-year tranches will be used on sustainability projects for healthcare, education and retirement needs, the government said.

“The fund offering aims at promoting green development, the recycling industry, low carbon emissions and other sustainability projects to make sure the city has a high quality of development that will improve the living conditions of people,” the statement said.

China’s ratio of government debt to gross domestic product is low compared with that of other countries.

It stood at 77 per cent at the end of 2022, compared with 121 per cent for the US, 111 per cent for France and 101 per cent for the UK, with Japan topping the list at 261 per cent, according to the International Monetary Fund.

This indicates there is room for mainland municipal governments to issue more bonds to raise funds.

The move also marks another example of Hong Kong’s role as a fundraising centre for Shenzhen, which is seen as the Silicon Valley of China.

The capital markets of Hong Kong and Shenzhen have a lot of room to cooperate, according to Shi Weigan, executive deputy director of the finance committee office of the Shenzhen Municipal Party Committee.

“There are more than 100 Shenzhen companies already listed in Hong Kong, including QuantumPharm, which was the first listing under Chapter 18C,” Shi said in a speech at the summit. “A large number of Shenzhen companies have also issued bonds in Hong Kong.”