From "Dim Sum" to "Main Course" – The Renminbi Dim Sum Bond Market Faces Great Development Opportunities

Deutsche Bank believes that the renminbi dim sum bond market is evolving from a marginalized "niche market" into a "mainstream asset" with significant allocation value, and a historic window of opportunity has opened.

According to the Chasing Wind Trading Desk, on December 3rd, Deutsche Bank released a report indicating that this transformation is supported by three core driving forces:

1. Supply-side explosion: In a low interest rate environment for the renminbi, various issuers from Chinese tech giants to countries along the "Belt and Road" are flooding into the dim sum bond market with unprecedented enthusiasm to reduce financing costs and manage exchange rate risks.

2. Demand-side qualitative change: Unlike the speculative demand of the past that relied on expectations of renminbi appreciation, the current stable growth of offshore renminbi funding pools mainly stems from genuine cross-border trade and capital settlement needs, providing a solid foundation for the market. More critically, policy tools such as the "Southbound Bond Connect" are effectively guiding vast amounts of capital from mainland China, fundamentally addressing the historical issue of insufficient investors.

3. Macroeconomic environment boost: Against the backdrop of a global search for dollar alternative assets, coupled with expectations of renminbi entering an appreciation channel, the attractiveness of dim sum bonds to global investors is significantly increasing.

In summary, the dim sum bond market is entering a virtuous cycle of "expanding issuance - enhancing liquidity - attracting more investors - encouraging more issuance." Investors should closely monitor the expansion of this market and view it as an increasingly important component of global asset allocation.

Issuance Surge: Dual Expansion of Market Size and Participants

The growth momentum of the dim sum bond market is astonishing. According to the report, the annual issuance of dim sum bonds denominated in renminbi and issued in Hong Kong has surged from 300 billion renminbi in 2021 to 850 billion renminbi in 2024, with expectations of reaching a scale of 900 billion to 1 trillion renminbi this year (2025). Currently, the market's outstanding scale has reached 1.8 trillion renminbi.

The core driving force behind issuance is the strong attractiveness of the renminbi as a financing currency. The lower interest rate environment for the renminbi has not only attracted government agencies and financial institutions from mainland China/Hong Kong but has also encouraged various corporate issuers to actively participate. Notably, Chinese tech companies, including Alibaba, Baidu, and Tencent, have completed their first dim sum bond issuances in the past year.

The breadth of the market is also extending. The first issuances by foreign entities such as the Development Bank of Kazakhstan and the Government of Indonesia mark a shift in the issuer base from China to international. Additionally, the low interest rate environment has also driven the elongation of financing durations, with the issuance of ultra-long bonds with maturities of 15 to 30 years increasing from nearly zero between 2020-2023 to 11 billion renminbi in 2024, and reaching 20 billion renminbi from 2025 to date.

The Mystery of Demand: From Speculation-Driven to Transaction-Driven Solid Foundation

Historically, insufficient investor demand has been a major bottleneck limiting the development of the dim sum bond market. The boom in the early 2010s was highly tied to expectations of RMB appreciation. When the RMB began to depreciate in 2015, the market quickly shrank, with issuance plummeting to less than 50 billion RMB in 2017, only one-sixth of the peak in 2014.

However, the biggest highlight of the recent market is its demonstrated resilience. During the period from 2022 to 2024, when the RMB also faced depreciation pressure, the dim sum bond market continued to expand. The report reveals the key variable behind this: the nature of the offshore RMB funding pool has fundamentally changed.

Analysis shows that since 2017, the growth of offshore RMB deposits has been highly correlated with the growth of cross-border RMB payment transaction volumes, which can almost be completely explained. This indicates that current offshore RMB holdings are primarily driven by transactional demand, such as corporate payments, rather than speculation.

Data shows that the settlement share of RMB in current account payments increased from 18% in 2021 to 28% in the first half of 2025. In the third quarter of 2025, the RMB settlement amount under trade and current accounts reached 4.76 trillion RMB, three times that of the same period in 2014. This provides a more stable and reliable liquidity foundation for the dim sum bond market than ever before.

Policy Tailwind: "Southbound Bond Connect" Becomes a Key Accelerator

The Chinese government's accelerated push for RMB internationalization is providing a strong tailwind for the dim sum bond market. The report points out that the policy tone for RMB internationalization in China's upcoming "14th Five-Year Plan" has shifted from "steady and prudent advancement" to "advancement," showing a stronger determination.

The People's Bank of China (PBOC) has made a series of commitments in its latest "2025 RMB Internationalization Report," including: regularly issuing government bonds and central bank bills overseas to improve the yield curve, supporting more qualified entities to issue bonds in Hong Kong, and increasing long-term RMB liquidity supply through various channels such as currency swaps.

Among all policy tools, the "Southbound Bond Connect" has played a crucial role as an accelerator. Since its launch in 2022, this mechanism has allowed mainland banks to directly invest in dim sum bonds, with a cumulative scale reaching 600 billion RMB, greatly alleviating the market's demand bottleneck. The report emphasizes that the next step to expand the eligibility of "Southbound Bond Connect" to non-bank financial institutions such as insurance companies and asset management companies will be a key step. The participation of these long-term institutional investors will further enhance market demand and liquidity, especially for long-duration bonds.

Towards a Positive Cycle: New Opportunities in Global Asset Allocation

A favorable "window of opportunity" has emerged. Globally, high dollar interest rates have suppressed the financing demand for dollar-denominated bonds. According to data from the International Capital Market Association (ICMA), the share of dollar-denominated bonds in Asian international bond issuance has decreased from 83% in 2020 to 67% in 2024, while the share of renminbi-denominated bonds has rapidly increased to 11%.

Looking ahead, a strong renminbi will become another significant boost. The report predicts that after several years of depreciation, the renminbi has entered an appreciation channel (having appreciated about 4% against the dollar from 2025 to now) and is expected to continue strengthening in 2026-27. This will significantly enhance the attractiveness of renminbi assets, including dim sum bonds, to global investors.

Seizing this opportunity, the dim sum bond market is expected to enter a self-reinforcing positive cycle: a larger market size and liquidity will attract more issuers, and abundant supply will attract more investors. This will ultimately solidify the renminbi's position as a store of value, allowing it to grow from a "dim sum" to a "main course" on the balance sheets of global investors