Russia's Panda Bond Plans Hit Snag as Chinese Banks Fear Sanctions
Russian companies' attempts to tap into China's bond market for funding have hit a snag. Despite the Russian government's encouragement, Chinese state-owned banks and brokerages are refusing to underwrite Russian 'panda' bonds due to fears of Western sanctions. Meanwhile, Russia is scrambling to import gasoline from China and other Asian nations to ease domestic shortages.
The reluctance of Chinese banks and institutions to participate in financing Russian companies' panda bonds is not new. They have been refraining from doing so since 2017, with no new issuances since then, except for one by Rusal before the Ukraine conflict. The primary concern is the risk of secondary Western sanctions, despite the Chinese government's encouragement.
Russia's top state corporations, such as Rosatom and Gazprom, have explored selling yuan-denominated panda bonds. However, little progress has been made in their plans over the past year. Some Russian firms are now considering alternative ways to secure funding, such as tying loan restructuring to commodities trade deals.
Chinese banks and investors are avoiding Russian panda bonds due to geopolitical risks. Despite Russian officials maintaining that nothing prevents companies from issuing these bonds if buyers can be found, the fear of sanctions is making potential investors cautious.
The inability of Russian companies to issue panda bonds in China is a setback for Russia's efforts to diversify its funding sources. With Chinese banks and investors avoiding these bonds due to geopolitical risks, Russian firms are exploring alternative ways to secure funding. Meanwhile, Russia continues to face domestic gasoline shortages, turning to China and other Asian nations for imports.
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