HSBC is in from the cold as China’s finance ministry adds bank in latest €4 billion bond sale after previous exclusion

Chad Bray
·3-min read

HSBC is one of a dozen banks chosen to manage the latest international sale of Chinese sovereign bonds after it was left off a dollar-denominated sale last month for the first time since the country resumed issuing international debt in 2017.

The Ministry of Finance issued a mandate this week for multi-tranche, euro denominated bonds to three state-owned banks and nine foreign lenders that also included BofA Securities, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Standard Chartered, according to people familiar with the matter.

The transaction is expected to price on Wednesday at about 4 billion (US$4.74 billion), said one of the people, who was not authorised to discuss the matter publicly.

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The biggest of Hong Kong’s currency issuing banks, HSBC was left off a US$6 billion international sale in October, which generated strong interest among US investors. It was the only bank that had taken part in the country’s last US dollar debt sale in November 2019 not to be included. Citigroup, which replaced HSBC on the October issuance, was not among the banks on the latest euro-denominated offering.

HSBC previously declined to comment on specific deals, but said at the time it maintained a “good ongoing working relationship” with the Ministry of Finance.

As the relationship has worsened between Washington and Beijing in the past few years, London-based HSBC has increasingly found itself in the middle of rising tensions between the world’s two biggest economies.

US Secretary of State Mike Pompeo and other American officials criticised HSBC over its support of a controversial national security law adopted by Beijing for Hong Kong in June. Mainland media have criticised the bank over help it provided to US prosecutors in an investigation of Chinese telecommunications company Huawei Technologies, with at least one outlet suggesting the lender could be placed on an “unreliable entities” list being drafted by Beijing.

However, the rhetoric against HSBC in the mainland may be cooling down somewhat.

In a Twitter post last month, Liu Xiaoming, China’s ambassador to the United Kingdom, pointed to HSBC as an example of how China is opening up its markets to foreign businesses.

The Ministry of Finance issued a mandate this week to state-owned lenders Bank of China, Bank of Communications and China International Capital Corporation, alongside foreign banks BofA Securities, Credit Agricole, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Societe Generale, Standard Chartered and UBS, according to the people familiar.

China last issued euro-denominated bonds in November 2019 after a 15-year gap, raising about 4 billion on that occasion too.

The back-to-back dollar and euro debt offerings come as Beijing moves to further open up its financial sector to foreign lenders, and Chinese government debt is being more widely included in major bond indices.

Foreign investors held about 3 trillion yuan (US$458 billion) of Chinese bonds at the end of October, with the Chinese bond market expanding by 40 per cent annually over the past three years. China is the world’s second-biggest bond market after the US, having surpassed Japan last year.

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