Yulan bond debuts in Dubai amid Beijing’s yuan-denominated asset push

The Yulan renminbi bond structure made its debut in Dubai amid geopolitical tensions in the Middle East, amid strong investor interest in yuan assets. Bank of China Dubai rang the listing bell for its offshore bond, priced at 2 billion yuan (US$299.6 million) with a two-year term. Sovereign accounts held over 30% of the allocation.

This marks the first offshore bond using the Yulan framework in the Middle East and North Africa, and the first Nasdaq Dubai listing of its kind. Gu Weiyong, chief investment officer at Shanghai-based asset manager Ucon Investment Management, noted that the bond provides Middle Eastern investors with a new investment channel and represents China's efforts to internationalize its currency.

Yulan bonds were launched in late 2020, developed in partnership with Euroclear Bank. The framework supports Chinese offshore bonds in Euroclear-eligible currencies. Dubai witnessed another milestone in May, with Shanghai Pudong Development Bank selling 1 billion yuan worth of bonds under the Yulan framework, with 80% of investors overseas.

Analyst Yu Lifeng attributes the expansion to the divergence between Chinese and US monetary policies, widening the funding-cost advantage of yuan financing. Yulan bonds are issued in renminbi, US dollars, and euros, with issuers ranging from financial institutions to companies. Their cumulative issuance reached 30 billion yuan over six years.

Fitch Ratings affirmed ratings of China's six large state-owned commercial banks, including the Industrial and Commercial Bank of China (ICBC), which saw its viability rating upgraded from BBB to BBB+.