From "Dim Sum" to "Main Course" -- The RMB Dim Sum Bond Market Faces Major Growth Opportunities

Deutsche Bank believes that the RMB Dim Sum bond market is evolving from a marginal “niche market” into a “mainstream asset” with significant allocation value, and that a historic development window of opportunity has opened. According to Chasing Wind Trading Desk, on December 3, Deutsche Bank released a report pointing out that this transformation is supported by three core driving forces: 1. Supply-Side Explosion: In the low RMB interest rate environment, a wide range of issuers—from Chinese tech giants to countries along the Belt and Road—are pouring into the Dim Sum bond market with unprecedented enthusiasm to lower financing costs and manage exchange rate risks. 2. Demand-Side Transformation: Unlike the past, when speculative demand was driven by RMB appreciation expectations, the current stable growth of offshore RMB liquidity pools is mainly due to genuine cross-border trade and capital settlement needs, providing the market with a solid foundation. More importantly, policy tools such as the “Southbound Bond Connect” are effectively channeling vast amounts of funds from Mainland China into the market, fundamentally solving the historical shortage of investors. 3. Macro Environment Tailwinds: Against the backdrop of a global search for alternatives to dollar assets and the anticipated upward trajectory of the RMB, Dim Sum bonds are becoming significantly more attractive to global investors. In summary, the Dim Sum bond market is entering a virtuous cycle of “expanded issuance–enhanced liquidity–attracting more investors–encouraging more issuance.” Investors should closely monitor the market’s expansion and view its growing significance in global asset allocation. Issuance Boom: Dual Expansion of Market Size and Participants The Dim Sum bond market is experiencing astonishing growth momentum. According to the report, annual issuance volume of RMB-denominated Dim Sum bonds in Hong Kong has surged from RMB 300 billion in 2021 to RMB 850 billion in 2024, and is expected to reach RMB 900 billion to 1 trillion in 2025. The current total market size has reached RMB 1.8 trillion. The core driver behind issuance is the strong appeal of RMB as a funding currency. The low RMB interest rate environment has attracted not only government and financial institutions from Mainland China/Hong Kong, but also motivated various corporate issuers. Notably, Chinese tech companies such as Alibaba, Baidu, and Tencent completed their inaugural Dim Sum bond issuances over the past year. Market breadth is also expanding. First-time issuances by foreign entities such as the Development Bank of Kazakhstan and the Indonesian government mark the shift of issuers from China to international players. In addition, the low interest rate environment has resulted in extending financing durations, with issuance of ultra-long-term bonds (15–30 years) rising from almost zero in 2020–23 to RMB 11 billion in 2024, and RMB 20 billion so far in 2025. Demand Puzzle: Solid Foundation from Speculation to Transaction-Driven Historically, insufficient investor demand was the main bottleneck restricting the development of the Dim Sum bond market. The boom in the early 2010s was highly linked to RMB appreciation expectations. When the RMB began to depreciate in 2015, the market contracted rapidly, with issuance dropping to less than RMB 50 billion in 2017, only one-sixth of the 2014 peak. However, the recent highlight of the market is its demonstrated resilience. During 2022–24, even as the RMB faced depreciation pressure, the Dim Sum bond market continued to expand. The report reveals the key variable behind this: the nature of the offshore RMB liquidity pool has fundamentally changed. Analysis shows that since 2017, the growth of offshore RMB deposits is highly correlated with the increase in cross-border RMB payment transactions, and can be almost entirely explained by it. This indicates that the current holding of offshore RMB is mainly due to enterprises’ transactional needs such as payments, rather than speculation. Figures show that RMB’s share in current account payments rose from 18% in 2021 to 28% in the first half of 2025. In the third quarter of 2025, RMB settlement volume under trade and current account items reached RMB 4.76 trillion, three times the equivalent period in 2014. This provides the Dim Sum bond market with a more stable and reliable liquidity foundation than ever before. Policy Tailwinds: “Southbound Bond Connect” as a Key Accelerator China’s policy intention to accelerate RMB internationalization is providing a strong tailwind for the Dim Sum bond market. The report notes that China’s upcoming “15th Five-Year Plan” has shifted the policy tone for RMB internationalization from “steady advancement” to “advancement,” indicating greater determination. In its latest “2025 RMB Internationalization Report,” the People’s Bank of China (PBOC) made a series of commitments, including: regular overseas issuance of government bonds and central bank bills to improve the yield curve, supporting more qualified issuers to issue bonds in Hong Kong, and increasing long-term RMB liquidity supply through various channels such as currency swaps. Among all policy tools, the “Southbound Bond Connect” plays a vital accelerating role. Since its launch in 2022, it has allowed mainland banks to directly invest in Dim Sum bonds, with cumulative scale reaching RMB 600 billion to date, greatly alleviating market demand bottlenecks. The report emphasizes that the next key step is to expand eligibility for Southbound Bond Connect to insurance companies, asset management companies, and other non-bank financial institutions. The participation of these long-term institutional investors will further boost market demand and liquidity, especially for long-duration bonds. Towards a Virtuous Cycle: New Opportunities for Global Asset Allocation A favorable “window of opportunity” has emerged. Globally, high dollar interest rates have curbed financing demand for dollar bonds. According to the International Capital Market Association (ICMA), the share of dollar-denominated issuance in Asian international bonds fell from 83% in 2020 to 67% in 2024, while the share of RMB-denominated issuance quickly grew to 11%. Looking ahead, a stronger RMB will serve as another major advantage. The report predicts that, after several years of depreciation, the RMB has entered an appreciation channel (having appreciated about 4% against the dollar from 2025 to present), and is expected to continue strengthening into 2026–27. This will greatly increase the attractiveness of RMB assets, including Dim Sum bonds, to global investors. Seizing this opportunity, the Dim Sum bond market is poised to enter a self-reinforcing virtuous cycle: Greater market size and liquidity will attract more issuers, and richer supply will draw in more investors. This will ultimately consolidate the RMB’s position as a store of value, enabling it to evolve from a “snack” into the “main course” on the global investor’s balance sheet. Risk Warning and Disclaimer The market has risks; investment should be made cautiously. This article does not constitute personal investment advice and does not take into account the particular investment objectives, financial circumstances, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are appropriate to their specific situation. Investing accordingly is at your own risk.