African Governments Eye China's Panda Bonds Amid Debt Concerns

African governments are contemplating raising capital through China's domestic debt markets via panda bonds, though challenges persist due to existing debt obligations and market infrastructure inadequacies. Despite a surge in panda bond issuance, the non-convertibility of the Chinese yuan and liquidity concerns remain significant hurdles.

African governments are exploring the issuance of panda bonds on China's domestic debt markets, yet obstacles such as heavy debt loads and insufficient market infrastructure could thwart their plans, according to investors and analysts.

For three decades, African governments have issued bonds in currencies other than their own, primarily in U.S. dollars and euros, to attract investments. However, integrating into China's vast bond market remains a significant challenge. This initiative is a priority for both Beijing and African nations in need of capital.

At a recent China-Africa summit in Beijing, President Xi Jinping expressed support for African countries issuing panda bonds in China. However, Lynda Iroulo, assistant professor at Georgetown University in Qatar, highlighted the non-convertibility of the Chinese yuan as a deterrent for global investors. Although panda bond issuance has surged, fundamental barriers like liquidity issues and the strong dollar's dominance persist.

(With inputs from agencies.)