DEAL: China's first covered bond

Author: Lizzie Meager | Published: 16 Nov 2016
No longer the Forbidden City: the deal gives investors access to onshore PRC climate-aligned bonds
The Bank of China’s London branch has issued the first ever covered bond by a Chinese entity – and it’s also green.

This is also the first international note issued by a Chinese entity that’s secured by onshore assets: green, or climate-aligned as they are known onshore, bonds that are traded on China’s interbank bond market. It’s evidence of the growing relationship between London and Beijing, after the government issued its first offshore debt ever in the UK in May.

The $500 million transaction also addresses a longstanding issue for international investors in Chinese assets: limited recourse. Investors have dual recourse to both the Bank of China’s London branch, and the collateral bond assets.

“The China interbank bond market is largely closed to international investors, so this offering structure allowed investors indirect...