THE Philippines government is to issue its maiden panda bonds amounting to 1.4 billion yuan (US$200 million). Bank of China (BoC) will act as the sole bookrunner and a lead underwriter. BoC will also assist the Philippines to register in China's interbank market, BoC said in a note on November 16.

Chinese Premier Li Keqiang visited the Philippines this week. Being the first Chinese Premier to visit the Philippines in 10 years, Li and President Rodrigo Duterte witnessed the signing of 14 agreements, including the panda bonds agreement. Finance Secretary Carlos Dominguez III signed the underwriting agreement on behalf of the Philippine government with BoC chairman Chen Siqing, in a signing ceremony at Malacanan Palace on November 15.

Since Chinese President Xi Jinping’s meeting with President Duterte in 2016, Sino-Philippine relations have been improving. Both sides have been increasingly pushing bilateral economic ties, resulting in a rise in the demand for renminbi in the Philippines.

“We thank the Bank of China for taking the lead in helping us gain a foothold in the panda bond market. We are very happy that the BoC has come to our assistance,” says Dominguez.

“The Panda bond issue will diversify our funding sources and provide benchmarks for other Philippine issuers in the onshore market, particularly at this time that the renminbi is a reserve currency,” says Rosalia de Leon, the Philippines’ national treasurer. “The bond issue will also complement financial support from China for the implementation of critical infrastructure projects,” she adds.

This issuance of Panda bonds is a milestone for the two countries in terms of capital markets co-operation, BoC has said. The Philippines will benefit by enlarging the country’s foreign exchange reserve, expanding its investment fields, and reducing the cost of financing. China, on the other hand, benefits from the further internationalization of the renminbi.