Panda Bonds: Market Development and Opportunities for Exploration with Mexico

Key Messages

• The market has reached scale. Annual issuance has stood at historic highs since 2023: close to RMB 195bn in 2024, about RMB 164bn in 2025, and accelerating again in the first half of 2026.
• All four issuer categories are active. Sovereign and government-class institutions, development institutions, international commercial banks and multinational corporates all issue regularly, offering a range of models to compare.
• Funding costs are at historic lows. The weighted average coupon in 2025 was about 2.01%, and 2026 three-year transactions have priced in a 1.75%–2.50% range.
• Latin America has entered the market. A Brazilian corporate issued South America's first green Panda Bond in 2024 and returned in 2025; Brazil's Finance Ministry filed for a sovereign issue in June 2026.
• The real economy is already connected. Trade, automotive flows and Chinese industrial investment in Mexico create underlying RMB-related activity that financial instruments could, over time, be designed to serve.
• Much remains to be explored. Legal, regulatory, currency and policy questions would need careful study before any concrete step.

1. Panda Bonds at a Glance

Since the first issues in 2005, the market has developed a stable institutional framework, operating mainly in the China Interbank Bond Market under the registration system of the National Association of Financial Market Institutional Investors (NAFMII).

2. How Much Has Been Issued?

2.1 Cumulative and annual issuance

According to the People's Bank of China, cumulative Panda Bond issuance had exceeded RMB 1.3 trillion by the end of June 2026, from more than 110 issuers in 24 countries and regions across Asia, Europe, Africa, North America and South America. Cumulative issuance first passed RMB 1 trillion in July 2025 and has continued to grow rapidly since.

2.2 Tenors and cost

• Tenor: the weighted average tenor in 2025 was 2.94 years. Three-year paper is the mainstream, accounting for about 46% of issuance in H1 2025, with five-year at about 13%.
• Coupons: the weighted average coupon in 2025 was 2.01%, about 22bp lower than in 2024 and a record low; three-year transactions in 2026 have priced between 1.75% and 2.50%.
• Outstanding stock and investors: the market's outstanding size was around RMB 400bn as of October 2025. As of end-June 2025, offshore institutions held about RMB 59.7bn, or 18.9% of the outstanding stock, with the remainder held by Chinese commercial banks, insurers, wealth-management products and funds.
• Issuer mix: foreign-background issuers accounted for 52.8% of issuance in 2025, above 50% for the first time since 2019.

3. Case Studies: Four Issuer Types, with Tenors and Coupons

The following examples are drawn from public reports and issuer announcements. Pricing in each case reflects that issuer's own credit profile and market conditions at the time, and is not indicative for any other issuer.

3.1 Sovereign and government-class issuers

The sovereign group spans investment-grade countries issuing on their own credit (Korea, the Philippines, Portugal, Hungary, Indonesia) and countries entering with multilateral credit enhancement (Egypt, Pakistan). British Columbia's early transaction also shows that North American government-class issuers are familiar to Chinese investors.

3.2 International development institutions

3.3 Foreign financial institutions (banks)

3.4 Multinational corporates

4. Latin America's First Chapter

• Corporate debut (November 2024): Brazilian pulp producer Suzano issued a RMB 1.2bn three-year green Panda Bond, becoming the interbank market's first South American issuer, and returned in October 2025 with RMB 1.4bn. Its board has approved a China financing plan of up to RMB 20bn.
• Sovereign first mover (2026): On 25 June 2026, Brazil's Ministry of Finance filed its application with NAFMII for a first sovereign Panda Bond of up to RMB 5bn. The filing followed the fourth meeting of the China–Brazil financial strategic cooperation working group, at which the PBOC Governor welcomed Brazilian sovereign issuance.
• Policy signal: Chinese authorities have publicly expressed support for making it easier for more foreign institutions — including sovereign states — to issue in China, alongside cooperation on local-currency use and financial-market connectivity.

For the region, the practical groundwork — documentation, investor familiarity with Latin American credits, and regulatory precedent — is being laid now. Later issuers typically benefit from the experience of those who go first.

5. Mexico's Foundations

5.1 A sophisticated, globally recognised borrower

Mexico is one of the most experienced sovereign borrowers in international capital markets, with regular access to the US dollar, euro and Japanese yen markets and an investment-grade profile with all major international rating agencies. The Ministry of Finance and Public Credit (SHCP) has described its use of external markets as strategic and complementary to the local market — a framework within which additional channels can be evaluated on their merits.

5.2 A proven record in Asia

• Samurai market leadership: Mexico has built a yen curve over many years and, as of 2024, was the largest international sovereign issuer of sustainable bonds in the Samurai market.
• 2026 Samurai transaction: in August 2026, SHCP placed ¥282.8bn (about USD 1.77bn) with 52 investors across four tranches — 3-year at 3.16%, 5-year at 3.61%, 10-year at 4.46% and 20-year at 5.49%. About 85% of Mexico's outstanding bonds in the Japanese market are aligned with the UN Sustainable Development Goals.
• Step-by-step market building: from early transactions supported by the Japan Bank for International Cooperation (December 2009: ¥150bn, 10 years, 2.22%) to later standalone issues, Mexico's history in Japan shows how a new funding channel can be developed gradually.

5.3 An established sustainable finance framework

Since 2020, Mexico has implemented a sovereign sustainable finance strategy across the US, European and Japanese markets. Sustainability-labelled paper is a growing segment of the Panda market — Hungary's green sovereign, the sustainable bonds of Egypt and Pakistan, and Suzano's green issues all fall into this category. An existing, internationally recognised framework would be a meaningful starting point.

6. The Real-Economy Connection

6.1 Trade

China is Mexico's second-largest trading partner, and Mexico is China's second-largest trading partner in Latin America. According to China Customs, bilateral trade reached USD 109.4bn in 2024, with Chinese exports to Mexico of USD 90.2bn and imports from Mexico of USD 19.2bn. China mainly exports machinery and electrical equipment, transport equipment and base metals, and imports copper ores, precious-metal ores, crude oil, integrated circuits and medical and optical instruments from Mexico.

6.2 The automotive corridor

• Mexico was the largest destination for China's vehicle exports in 2025, receiving about 410,000 units in the first nine months — close to one in ten vehicles shipped from China.
• China-made vehicles — from Chinese brands and from international manufacturers producing in China — accounted for about 22% of Mexico's light-vehicle sales in the first half of 2026, compared with about 0.3% in 2017.
• More than 25 Chinese automotive brands now operate in Mexico. Some have begun local assembly — JAC, for example, assembles vehicles in Hidalgo with "Hecho en México" certification in partnership with a Mexican group.
• Mexican imports of vehicles and parts from China rose from USD 3.1bn in 2017 to USD 13.5bn in 2024.

6.3 Industrial investment and presence

Chinese manufacturers have steadily increased their presence in Mexico. The Hofusan Industrial Park in Nuevo León hosts dozens of companies, including Hisense, which invested around USD 260m in a refrigerator plant, as well as firms in construction machinery, solar equipment and furniture. Brands such as Midea have operated in Mexico for close to two decades. These operations involve cross-border flows of equipment, components and services, much of it with Chinese suppliers.

6.4 Financial infrastructure

RMB clearing services are available in Mexico through Chinese banks with local operations, and direct RMB–peso clearing services have reportedly been launched by a Chinese bank in 2026. The plumbing that allows RMB funds to move efficiently between the two economies is gradually being put in place.

7. Where Panda Bonds Could Connect

The following are offered as starting points for discussion, not as proposals. Each would require study by the relevant Mexican authorities and companies and, where relevant, coordination with Chinese counterparts. Feasibility and timing would depend on Mexico's own policy priorities, legal framework and market conditions.

8. What Further Work Would Involve

Moving from interest to any concrete action would require careful groundwork. Without pre-judging any decision, the main workstreams would typically include:

An illustrative, non-binding sequence could be: exploratory dialogue → technical exchange → feasibility work → decision. The pace of each step would be for the Mexican side to determine.

9. Questions for Reflection

• What role, if any, could RMB funding play in a long-term strategy of diversifying the investor base?
• Are there segments of Mexico's trade with China — automotive, electronics, machinery or others — where RMB financing might help companies manage costs or currency exposure?
• Could a national development bank serve as a bridge between an RMB funding source and Mexican enterprises?
• Which Mexican companies or financial institutions could qualify to issue directly?
• Which sustainable-development priorities might resonate most with investors in China?
• What lessons might be drawn from Brazil's experience once its first sovereign Panda Bond is completed?
• What forms of bilateral financial dialogue would be most useful to explore these questions further?