BEIJING/SHANGHAI Jan 22 German automaker
Daimler AG will become the first foreign,
non-financial company to issue bonds in China's domestic market,
two sources close to the deal told Reuters on Wednesday.
The issuance marks an important step in China's gradual
campaign to reform its financial system and could pave the way
for other non-Chinese firms to tap the country's massive pool of
Market watchers expect robust demand for the Daimler bonds,
due to the company's strong credit rating and prestigious brand.
As part of its broader reform push, Beijing has pledged to
ease restrictions on the flow of investment funds into and out
of the country.
Though Daimler is likely to use the funds raised from
selling bonds in its Chinese operations, other foreign issuers
could eventually win permission to move funds raised in China to
Previously, the only foreign entities to issue so-called
"panda bonds" were state-backed financial institutions,
including the Asian Development Bank, the Japan Bank for
International Cooperation, and the International Finance Corp.,
the private-sector investment arm of the World Bank.
A few locally incorporated subsidiaries of foreign-invested
firms have issued bonds in China's domestic market. But the sale
by Daimler will mark the first non-financial issue by a firm
incorporated outside China.
Chinese and foreign firms have also issued yuan-denominated
so-called dim sum bonds in Hong Kong in recent years. Unlike
domestic bonds, dim sum issues are not subject to approval by
Daimler manufactures Mercedes-branded vehicles in China
through its joint venture with BAIC Motor, the passenger car
unit of state-owned Beijing Automotive Group. It
also imports cars manufactured abroad.
The company said last month it is preparing factories in
China to build Mercedes' next generation C-class sedan for the
"It's Mercedes-Benz's parent company selling panda bonds,
but details like the date of the auction aren't set yet," said
one of the sources, who spoke on condition of anonymity because
the plan is not yet public.
Bank of China will serve as sole
underwriter on the deal, the sources said.
Bonds outstanding in China's domestic interbank market,
where Daimler will sell its bonds, totaled 27.6 trillion yuan
($4.6 trillion) at the end of November, central bank data shows.
Non-financial corporate bonds account for about 9.3 trillion
yuan of that total, with the government and financial
institution bonds accounting for the rest. Another 1.8 trillion
yuan in bonds are traded on China's stock exchanges.
A Beijing-based spokesman with Mercedes-Benz declined to
Bank of China declined to comment.
($1 = 6.0505 Chinese yuan)
(Additional reporting by Norihiko Shirouzu; Editing by Shri