Linklaters advised the Ministry of Finance of the People’s Republic of China (MOF) on its €4bn sovereign bond offering, which was priced on 10 November 2021. This is the third issuance since the sale of euro-denominated sovereign bonds was resumed in 2019.

The issuance comprised €1.5bn 3-year bonds (yield: -0.192%), €1.5bn 7-year bonds (yield: 0.216%) and €1bn 12-year bonds, (yield: 0.759%). Following the €4bn sovereign bonds issued by the MOF in 2019 with a tenor of 7-year, 12-year and 20-year, and the €4bn sovereign bonds issued in 2020 with a tenor of 5-year, 10-year and 15-year, this issuance further improves the yield curve of the euro-denominated sovereign bonds of the PRC government and establishes an important benchmark for euro financings and pricings by Chinese enterprises.

This issuance has attracted an order book of 4.3 times the issue size from international investors, including international organisations, central banks, sovereign funds and insurance companies. The 3-year euro sovereign bonds have been priced flat with the 3-year mid-swap rate due to the strong demand during the bookkeeping and filing stage. This is the second time a euro-denominated bond issuance in China has achieved a negative yield, following the 3-year euro sovereign bonds issued in 2020. This successful issuance is a testament to the strong confidence of international investors in the economic development of China and demonstrates China’s determination to further promote its opening to the international market.

This is the second time the MOF has simultaneously listed on the London Stock Exchange’s ISM, Luxembourg Stock Exchange’s Euro MTF market and the Hong Kong Stock Exchange. The Hong Kong Central Settlement System (CMU) was adopted as the main clearing system for the 12-year euro sovereign bonds, and this is the second consecutive year that the MOF has selected the CMU as the main clearing system for its non-renminbi denominated bond offering – demonstrating the PRC government’s continuous support for the development of the financial infrastructure in Hong Kong SAR.

The Linklaters team was led by Asia Managing Partner William Liu, with support from managing associate Allen Zhang. As the international legal advisor to the MOF, Linklaters advised on the issuance through a joint team across their Hong Kong, London and Luxembourg offices, providing a seamless service from the preparation of the transaction documents, to liaising with the CMU and the Bank of England, and listing the bonds in London, Luxembourg and Hong Kong.

Linklaters has been the international legal advisor to the MOF since 2009, providing legal services on all its sovereign offerings targeting international investors. In September and October this year, Linklaters advised the MOF on its landmark RMB 14bn offshore sovereign bond offerings and 144A/ Reg S US$4bn sovereign bond offering. Linklaters has also acted for the MOF on its RMB 6bn offshore sovereign bond offering which was announced yesterday.

Asia Managing Partner William Liu, commented:

“We are honoured to have been the international legal advisor to the MOF for the last twelve years and would like to extend our sincere gratitude for their continued trust in us. This successful euro-denominated sovereign bond offering once again shows the strong confidence of the market in the economic development of China and paves the way for even greater openness of the Chinese bond market. Our team looks forward to continuing to support the MOF on its ongoing offshore bond issuances as well as other strategic opportunities.”