Panda Bonds: a Critical Instrument to Mobilize Sustainable Investments

Photo taken on May 27, 2021 shows the 100 MW solar power plant in Kaposvar, Hungary.

According to the Climate Bonds Initiative (CBI), China has consistently ranked among the world's leading issuers of green bonds in recent years, underscoring its significant contribution to the development of global green finance. In November 2021, a pilot program for social responsibility and sustainable development-themed panda bonds was launched, providing new sources of funding for green transitions worldwide, particularly in emerging markets of the Global South.

Hungary became the first nation to issue green, social, sustainability and sustainability-linked (GSSS) sovereign panda bonds in China. To date, it has issued two batches of GSSS sovereign panda bonds, raising a total of RMB 3 billion. In November 2024, Brazilian multinational Suzano successfully issued a three-year GSSS panda bond product and raised RMB 1.2 billion, becoming the first issuer from South America.

In 2025, the GSSS panda bond issuance mechanism was further optimized to better align operational procedures with international practices. On the investor side, China has also significantly reduced transaction costs for foreign institutions investing in panda bonds, continuously enhancing the market attractiveness.

Photo from the Reform and Development of China's Bond Market (2025) shows the holdings of interbank market bonds by offshore institutions.

Key Challenges

Emerging markets countries face substantial financing gaps for green transition and sustainable development projects.

Solution Pathways

China's interbank market offers a broad range of financial products, including GSSS bonds, transition bonds, and perpetual bonds, providing diverse options for panda bond issuers and investors. A market-based pricing and allocation mechanism has been established, featuring diversified investors and active secondary market trading.

China, the European Union, and Singapore have jointly developed the Multi-jurisdiction Common Ground Taxonomy (M-CGT), enhancing the comparability and interoperability of national sustainable finance taxonomies.

Financial institutions can now conduct credit derivative transactions linked to green panda bonds through the interbank market's local currency trading system.

Practical Benefits for Local Communities

In 2025, China's interbank bond market — China's primary panda bond issuance market — recorded RMB 18.2 billion of GSSS and sci-tech innovation panda bond issues, accounting for 11.1% of total panda bond issues that year. This effectively supported the funding needs of overseas issuers engaged in green economy initiatives and the cultivation of new quality productive forces. Meanwhile, the share of medium- and long-term bond issues increased significantly to 79%, providing issuers with more stable long-term capital.

Photo from the White Paper on Green Bonds in China shows China's development in green bonds from 2016 to 2024.