China issuing US dollar bonds amid rising trade tensions: report

China will reportedly sell $3 billion worth of US dollar-denominated bonds on Thursday, a move that experts said if successful, would showcase global investors’ confidence in China’s financial system.

Amid China-US trade tensions, it would also expand China’s dollar debts in proportion to its massive dollar-denominated assets in preparation for fluctuations in bilateral trade, experts noted.

The Ministry of Finance said in September that an issue of five-, 10- and 30-year bonds totaling $3 billion would take place in Hong Kong. It would be China’s third sale of dollar-denominated debt since 2004 and the largest in terms of the amount, news website sohu.com reported.

Dong Dengxin, director of the Wuhan University of Science and Technology’s Finance and Securities Institute, told the Global Times on Wednesday that the issuance is highly likely to be successful because global investors have been looking for a dollar “safe harbor” against the US’ overheating economy and tech bubble. And China is considered as a safe market with stable economic growth. “The issuance would also show global investors’ confidence in the Chinese capital market against China-US trade rows.”

At the time, the move also shows that China’s policymakers are getting prepared for risks associated with escalating trade rows, Dong added.

“China’s holding of dollardenominated assets would exceed its demand for payment in dollar terms on expectations that escalating trade tensions would reduce China’s intention to buy US products. The policymakers need to scale up dollar liabilities to hedge against the risks of excessive assets in dollars,” he explained.

In September, China’s foreign exchange reserves stood at $3.09 trillion.