Offshore RMB bond issuance set to fall as funding costs rise

Offshore yuan bond issuance in Hong Kong looks likely to fall this year thanks to increasing funding costs compared to those of mainland China, South China Morning Post reported, citing analysts at major banks. The market had expanded rapidly since its 2007 inception since borrowers could raise money more cheaply in Hong Kong, growing to RMB564 billion (US$90.11 billion) in 2014, according to figures from Standard Chartered. But offshore funding costs rose sharply following Beijing’s approval last year of new channels to let the yuan flow back to the domestic market, with bond issuance for January down more than 70% year-on-year in Hong Kong, according to data from Reuters.