Shanghai Plans Subsidies to Revive FTZ Offshore Bond Market, Up to RMB 2.2 Million Per Issuance
Nashnova编辑部
Shanghai is drafting a plan to subsidize offshore bond issuance in its free-trade zone, offering up to RMB 2.2 million per deal, while the PBOC will let onshore banks buy in — capped at 50% per bond. Together, the moves aim to jump-start a market that has drawn almost no foreign participation since opening nearly a decade ago.
What exactly does the subsidy cover — and who gets priority?
The subsidy reimburses advisory, legal, and banking fees tied to issuance, up to RMB 2.2 million (≈ USD 327,000) per deal.
Priority goes to high-profile foreign institutions such as central banks. This means → Shanghai's real target is marquee names that lend credibility, not run-of-the-mill issuers.
Eligibility: bonds over RMB 200 million, maturity of one year or longer, valid through end-2028. Green bonds and issues using the digital yuan qualify for extra subsidies.
Why is the PBOC letting onshore banks buy "offshore" bonds?
The PBOC's Shanghai head office will allow onshore banks to purchase FTZ bonds through dedicated accounts — but caps onshore funds at 50% of any single bond.
In plain terms = the market was built for offshore investors, but they never showed up. Letting onshore money in creates a buyer base, while the 50% ceiling keeps the market from becoming purely domestic.
This reflects a hard reality: without onshore liquidity as a backstop, the market lacks enough bids and offers to function at all.
One year after reopening — what does the market actually look like?
The FTZ bond market — nicknamed the "Pearl Bond" market — reopened last year after a three-year freeze triggered by Beijing's crackdown on LGFV (local-government financing vehicle) borrowing.
Since reopening, RMB 7.1 billion in bonds have been issued. All but one came from offshore subsidiaries of Chinese banks and brokerages. This means → foreign issuers and foreign investors are essentially absent; the market is still an all-domestic affair.
LGFVs still account for 78% of outstanding FTZ bonds — a highly concentrated structure.
How do costs and competition stack up?
This month, an overseas unit of Shanghai Electric issued the first non-financial corporate bond since the relaunch, at a coupon of 1.8%. For comparison, US investment-grade corporates (ICE BofA BBB index) yield roughly 5.5%.
In plain terms = the rate is very cheap for issuers but very low for investors — and that gap is a core reason foreign money stays away.
A banking source said illiquidity and high issuance costs remain the two biggest bottlenecks, but "with subsidies, FTZ bond issuance costs should be no higher than Panda bonds" — bonds issued onshore by foreign entities.
Can this policy push break the stalemate?
The Shanghai FTZ is over a decade old and competes directly with Singapore and Hong Kong for Asian offshore bond business — both offer more mature legal frameworks, deeper investor bases, and better secondary-market liquidity.
This means → subsidies can lower the entry cost for issuers, but what foreign institutions really care about is liquidity, legal certainty, and market depth — none of which a subsidy alone can deliver.
Sources stress the plan is not finalized and may still change. Whether this round of policy support can break through foreign institutions' wait-and-see stance will be the real test of its effectiveness.
市场有风险，内容仅供研究参考，不构成投资建议。