Hainan Province has achieved a new milestone in offshore bond issuance. Recently, the province successfully issued RMB 5 billion in offshore yuan-denominated local government bonds in Hong Kong, marking the fifth such issuance since 2022 and the first offshore yuan bond sale following the full island-wide customs closure operation of the Hainan Free Trade Port.
The issuance drew widespread investor attention and robust subscription demand, with peak order book size reaching RMB 43.7 billion—nearly nine times the offering size and exceeding levels from all previous years. Nationwide, only Hainan Province, Guangdong Province, and Shenzhen hold the qualification to issue offshore yuan local government bonds, and Hainan is the first provincial government on the Chinese mainland to tap the Hong Kong bond market.
For the Hainan Free Trade Port, five consecutive years of bond issuance in Hong Kong have generated RMB 23 billion in cumulative bond financing. More significantly, financial innovation has paved a channel connecting international investors with the development of the free trade port—a pathway that continues to widen and grow in value.
Why Issue Bonds? A Win-Win Financing Route
Bond issuance is a key form of direct financing, with capital being the most immediate need. Local governments already have mature channels for bond financing domestically, so why venture to Hong Kong? Within Hainan's local government bond portfolio, the proportion of offshore yuan bond issuance remains modest, but the strategic significance of this new route is profound.
"Hainan's five consecutive years of offshore bond issuance have focused on the 'Five-Direction Strength' strategy, launching multiple national firsts in bond categories, including blue, sustainable development, and aerospace-themed bonds. This not only channels international capital but also tells Hainan's opening-up story to the world," said Li Xunmin, Director of Hainan Provincial Department of Finance. "As a critical move in local fiscal policy serving national strategy, Hainan's finance leverages the Hong Kong-Hainan partnership, relying on Hong Kong's status as an international financial center to use financial innovation to mobilize global capital, empowering the Hainan Free Trade Port as a key gateway for China's new era of opening-up and sharing development dividends with all parties."
Offshore issuance serves as a window to share the opportunities of the free trade port. Beyond diversifying Hainan's external financing channels, it showcases the port's image to international markets. During the early stage of free trade port development, the provincial government's annual offshore bond issuance as a high-credit entity attracts attention from overseas investors—especially institutional players—and guides international capital markets in value discovery of this distinctive Chinese free trade port. It also provides favorable pricing benchmarks for local enterprises seeking external financing and offers policy benefits of cross-border investment convenience, drawing more global investors to participate.
The practice advances institutional opening-up by adhering to international capital market rules and standards, helping Hainan-based entities accumulate experience in offshore financing. The ongoing pilot of capital account liberalization through offshore bonds explores broader applications for cross-border capital flows in the free trade port.
It also strengthens the Hong Kong partnership. Both Hainan and Hong Kong hold strategic positions and major opening-up missions in the national development landscape, and their cooperation has deepened over the years. Issuing bonds in Hong Kong facilitates closer collaboration, vitalizes the offshore yuan bond market, and accelerates the internationalization of the Chinese currency.
From a funding perspective, bond proceeds support upgrades to infrastructure and public services, promote green and low-carbon lifestyles, accelerate the cultivation of new quality productive forces, and help build a modern industrial system—laying a solid foundation for the port's customs closure operation and long-term growth.
The considerations behind the issuance are multifaceted, which is why Hainan's Hong Kong bond sales carry a distinct "Hainan imprint." In terms of issuance approach, roadshows serve as an annual highlight, providing a key platform for face-to-face communication with global investors. Hainan government representatives present the stage-by-stage achievements of the free trade port, tell the Hainan story compellingly, and engage in deep exchange with offshore capital markets to address investor concerns.
In terms of bond design, the offshore yuan local government bond categories fully reflect Hainan's resource endowments, strategic positioning, and industrial direction. Bank of China, which has served as ESG certification advisor for five consecutive years, noted that Hainan continues to expand the boundaries of innovation in bond categories and fund allocation, offering international investors diversified, high-quality yuan-denominated investment options while setting practical precedents for other entities to issue themed bonds in the offshore market.
Who Is Buying? Global Capital Votes for Hainan's Value
Two key metrics stand out from this year's issuance. First, the peak order book. Higher peak orders and subscription multiples signal stronger market demand. This year's peak order volume of RMB 43.7 billion—nearly nine times the issuance size—indicates substantial institutional interest and strong investor appetite. Second, pricing rates. Lower rates mean lower financing costs for the issuer. Of the RMB 5 billion in bonds issued this year, the RMB 2.5 billion 3-year sustainable development bonds were priced at 1.41%, the RMB 1.5 billion 5-year blue bonds at 1.51%, and the RMB 1 billion 10-year education-themed bonds at 1.81%. The low rates across all tenors confirm that Hainan successfully achieved low-cost financing offshore.
Who is actively subscribing? The roadshows targeted investors primarily in Asia and Europe, attracting 59 institutional investors from seven countries including China, the United States, the United Kingdom, France, Japan, Switzerland, and the Philippines. Subscribers ranged from policy banks, commercial banks, and investment banks to brokerages, insurers, and asset management firms. Over the past five years, Hainan's offshore bond investors have spanned banks, brokerages, asset managers, funds, insurers, and investment institutions, with foreign-background international investors such as HSBC and Citigroup actively participating in bookbuilding and receiving allocations.
An offshore bond issuance is, in effect, an international examination. Investors weigh multiple factors, including government credit, development prospects, and portfolio allocation value. Why buy Hainan's offshore bonds? Analysts at Agricultural Bank of China Hong Kong branch highlight that the Hainan Free Trade Port's customs closure operation has made a strong start, with quality industrial investment gains, innovative use of bond proceeds, and sustained international capital confidence. As a high-credit government entity issuing for the fifth consecutive year, Hainan enjoys full market recognition and a solid credit foundation, allowing investors to share in the long-term dividends of the port's opening-up.
China Construction Bank (Asia), an investor in this year's bonds, expressed strong confidence in the free trade port's prospects and distinctive industries. Huang Hai, Head of Debt Capital Markets at CCB (Asia), noted that Hainan's offshore issuance enriches the offshore yuan bond market with high-quality investment products. This year's issuance also welcomed HSBC as the first foreign institution to join the underwriting syndicate. Li Qile, HSBC's Greater Bay Area General Manager, said that Hainan Free Trade Port's unique positioning and policy advantages provide fertile ground for normalized offshore yuan bond issuance, investor base expansion, and product innovation. "Especially as the full customs closure operation commenced in December 2025, cross-border investment and financing space has broadened, driving more efficient factor flows. Leveraging Hong Kong's international financial center platform and our global network, HSBC will deepen cooperation in offshore yuan bonds and sustainable finance, continuously bringing international investors to Hainan and connecting Hainan's quality projects to global markets."
How to Broaden the Path? Expanding Cooperation Across Multiple Fronts
In July this year, the Long March 10B carrier rocket successfully completed its "first flight + recovery" at the Hainan Commercial Space Launch Site, drawing widespread attention domestically and abroad. The Wenchang International Aerospace City is making steady progress along its "launch site-driven industry" and "industry-city integration" path. Last year, Hainan innovatively issued China's first aerospace-themed local government bond in Hong Kong to support related project construction in Wenchang.
"Commercial aerospace is both technology-intensive and capital-intensive. The offshore yuan bond market presents a strategic opportunity—a vital bridge linking global capital with the commercial aerospace industry," a spokesperson for the Wenchang International Aerospace City Administration said. For the Hainan Free Trade Port, five years of offshore issuance have yielded diverse benefits with ample room for expansion. Over the past four years, Hainan cumulatively raised RMB 18 billion in offshore yuan local government bonds, directing funds into hundreds of projects that support ecological protection, distinctive industries, and people's livelihoods, effectively converting foreign capital into momentum for free trade port development.
This year's RMB 5 billion issuance will primarily fund marine ecological protection, healthcare infrastructure, and key projects in the Lingshui Li'an International Education Innovation Pilot Zone, sustaining the port's blue and sustainability momentum and advancing the construction of an international education innovation island and talent hub. "This year we introduced the education-themed bond for the first time, promoting the 'Study in Hainan = Studying Abroad' education brand and developing an international talent cultivation model with Hainan Free Trade Port characteristics," said Zhang Xue, Deputy Director of Hainan Provincial Department of Finance.
On the institutional front, five years of offshore issuance have trained a cohort of professionals well-versed in offshore bond market operations and rules, streamlined issuance procedures and management mechanisms, and accumulated experience in roadshow promotion and external cooperation. This has also raised the free trade port's profile in international capital markets. This year, Hainan continues to use EF accounts for bond fund settlement, attracting diversified bond investors and more entities to invest in Hainan and benefit from the port's policy convenience. Bank of Communications, serving as financial agent for all five years, noted that Hainan has now used EF accounts for cross-border settlement for three consecutive years since 2024, expanding the accounts' application scenarios and showcasing the innovative vitality and openness of Hainan's financial practices.
Deepening the Hong Kong-Hainan partnership holds great potential. "This year's bond issuance symbolizes that cooperation between Hainan and Hong Kong has reached new heights—effectively combining Hainan's reform and opening-up policy strengths with Hong Kong's advantages as an international financial center, further enhancing the vitality of Hong Kong's offshore yuan bond market," said Michael Wong, Deputy Financial Secretary of the Hong Kong SAR Government.
How can Hainan further leverage this offshore financing channel? Liang Haiming, Dean of the Belt and Road Research Institute at Hainan University and Dean of the Silk Road Think Tank, believes that offshore bond issuance is a crucial step in deepening Hainan's integration with international capital markets. The free trade port could make greater use of financial tools like offshore bonds, with proceeds potentially channeled into industrial cluster cultivation, major infrastructure, and sustainable development projects. The two regions could use bond issuance as a starting point to expand cooperation into asset management, insurance, shipping finance, and trade finance, establishing a normalized, institutionalized cooperation framework.
Looking ahead, Hainan will continue to broaden cross-border investment and financing channels, deepen connections with international markets, and persist in both "going global" and "bringing in" approaches, providing more solid financial support for high-quality free trade port development and exploring replicable institutional experiences for the nation's broader opening-up. The road connecting Hainan Free Trade Port with international investors will only grow wider.