Wall Street Banks Pour Into Yuan Bonds as Dim Sum Market Revives

Global banks have raised 134 billion yuan, about $20 billion, in offshore yuan bonds in Hong Kong so far this year, nearly triple their total for all of 2025. The rush marks a new phase for the market known as dim sum bonds, once associated with cheap funding for companies expanding in China.

Citigroup, Barclays and BNP Paribas are the biggest issuers, according to data compiled by Bloomberg. Wells Fargo has seen its issuance jump more than tenfold, while Goldman Sachs has roughly tripled its volume. Bank of America, itself a major issuer, says the offshore yuan has overtaken the British pound to become the third-largest funding currency for global banks.

A market reborn

McDonald's introduced corporate America to dim sum bonds 16 years ago. In the first boom, investors bet the yuan would keep appreciating and accepted tiny coupons. Companies expanding in China could borrow cheaply in yuan and spend the proceeds locally. Others swapped the money into dollars, creating synthetic dollar funding below US borrowing costs.

The 2015 devaluation of the yuan ended that craze. Beijing engineered a liquidity squeeze to stop speculators betting against the offshore currency, known as the CNH. Overnight CNH borrowing costs in Hong Kong briefly hit 66.8% in 2016. A second boom, led by Chinese developers seeking alternatives to dollar debt, ended with the collapse of China Evergrande Group.

China's savings pool

The third era rests on access to China's vast pool of savings. Chinese technology giants such as Tencent and Alibaba are using it to finance AI expansion at coupon rates far below comparable dollar yields. Wall Street now wants that money too. Chinese insurers, asset managers and wealthy individuals are hungry for returns as mainland property remains weak and domestic yields sit near historic lows.

Beijing's controlled channel is the Southbound Bond Connect, which lets mainland investors put money offshore while keeping it largely within the yuan ecosystem. For the first time, banks in Hong Kong are on course to arrange more bond sales in yuan than in dollars. Beijing recently allowed mainland pension savings to flow south.

Sanctions and the dollar

China also wants to cut exposure to Western sanctions. After Russia's invasion of Ukraine, the G7 and its partners immobilized about $300 billion of Russian central-bank reserves. Alternative payment rails such as Project mBridge offer part of the answer. But China also needs deep yuan capital markets where trade partners can invest the currency they earn.

Mainland-linked investors in Hong Kong, Singapore and Taiwan still take most dim sum notes. Sovereign wealth funds, central banks and buyers in Belt and Road markets are gaining ground. Institutions outside Asia, which accounted for 3% to 4% of primary allocations before 2022, now take 8% to 10% of new-issue books, according to Tradeweb.

The yuan is nowhere near challenging the dollar. Its share of global central banks' reserve assets is a little over 2%. For Nigerian businesses, a deeper offshore yuan market could create an alternative funding and trade currency with China, but dollar dominance remains intact.