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Jakarta Post

Indonesia mulls panda bonds as Chinese currency gains prominence

  • Riska Rahman

    The Jakarta Post

Jakarta   /   Fri, July 26, 2019   /   01:47 pm
Indonesia mulls panda bonds as Chinese currency gains prominence Finance Ministry government debt paper director Loto Srinaita Ginting (kontan.co.id/Adinda Ade Mustami)

The increasing use of the Chinese renminbi in international trade may prompt the government to issue debt papers in the currency in the near future.

The Finance Ministry’s director of government debt paper, Loto Srinaita Ginting, said the government was considering issuing so-called panda bonds as a way to tap into a new bond market and diversify its investor base.

“If the government plans to increase its exposure to renminbi debt, there’s room for us to issue panda bonds,” she said after a forum on the use of the renminbi in international business in Jakarta on Thursday.

Similar to dim sum bonds, panda bonds are renminbi-denominated bonds from non-Chinese issuers. The only difference between the two is the place of issuance, with the former usually sold outside of China, while the latter is sold within mainland China.

Even though Loto acknowledged the instrument’s popularity in the global market, she said the government had to take a few things into consideration, including the debt paper’s maturity profile, the size of the instrument and the cost of debt.

She explained that, if the government were to seek funding from a short-term instrument, a panda bond might be a good option, as it offered tenures of three years and five years. However, the issuance might not fit the government now, as its current policy was to seek longer-term funding to help finance the state budget deficit, she said.