Unlocking RMB Bond Markets for Climate Finance

Can RMB become a new global currency for climate finance? As investment needs for the low-carbon transition continue to rise, attention is turning to new sources of sustainable capital beyond traditional US dollar and euro markets. 

China's RMB bond market is increasingly offering international issuers access to one of the world's largest pools of sustainable finance, through the Panda bonds, Dim Sum bonds and the emerging FTZ bond market. 

Eight years after Climate Bonds first looked at Green Panda Bonds, what has changed? To answer this question, Climate Bonds' latest report examines how these markets are evolving, what is driving their growth, and what needs to happen for RMB-denominated GSS+ bonds to become a scalable financing channel for emerging markets and developing economies. 

Three channels for climate-labelled capital

While all three markets are RMB-denominated and can support climate finance, they differ in investor base, regulatory requirements and the flexibility of proceeds. Understanding these differences is often more important than comparing issuance costs alone, as the most suitable market depends on an issuer's funding needs, operational footprint and financing strategy.

Panda bonds are issued onshore, in China's interbank market and stock exchanges, giving eligible foreign issuers access to domestic institutional investors. A dedicated pilot programme now allows overseas non-financial corporates, foreign government agencies, and international development institutions issue GSS+ Panda bonds under requirements broadly aligned with international standards, including ICMA's Green Bond Principles. Access comes with onshore documentation, disclosure and post-issuance requirements, which may require additional preparation, particularly for first-time issuers.

Dim Sum bonds are offshore RMB instruments issued mainly in Hong Kong. The market benefits from an established international investor base, an internationally aligned sustainable finance framework represented by the Hong Kong Taxonomy for Sustainable Finance, and incentives from the Government Sustainable Bond Programme. For many international issuers, the offshore market is more familiar, and proceeds can generally be deployed more flexibly across jurisdictions.

Free Trade Zone (FTZ) bonds are the newest of the three markets and remain relatively small. Issued within China's free trade zones but regulated as offshore instruments, they were developed to expand offshore RMB financing within China's regulatory framework, including for green and transition finance. The market was relaunched in 2025 with revised rules intended to avoid issues identified in earlier versions (known as Pearl Bonds), where proceeds could be recycled back onshore with concerns of arbitrage.

Rather than competing directly, these three markets offer complementary pathways into RMB capital. The appropriate choice depends on an issuer's objectives, funding structure, investor strategy and operational needs, rather than a single measure such as financing cost.

Growing steadily despite small share

As of end-2025, GSS+ bonds accounted for 6% of total Panda bond volume, reaching CNY64.2bn, of which 84% is aligned with Climate Bonds' methodology. The GSS+ Dim Sum market is larger, with cumulative issuance of CNY328.0bn, including CNY253.3bn considered aligned. Green bonds account for around 60–64% of GSS+ issuance across both markets.

Issuance has grown steadily since the first green Panda bond in 2016 and the first green Dim Sum bond in 2019, indicating that labelled climate finance is becoming an established part of cross-border RMB markets.

Cost advantages can appear under the right conditions

Data from GSS+ Panda bond issuance shows that some highly rated sovereign, supranational, and corporate issuers have been able to access RMB funding at interest costs that compare favourably with their USD funding costs, which helps to explain why Panda bonds have become more commercially interesting in a period of lower RMB yields.  

A fuller comparison is needed and should eventually, when the markets reach a more developed stage, move beyond headline coupons to an all-in cost framework covering base curve, credit spread, guarantee cost, fees, and hedging.

For many issuers, the stronger case for RMB financing lies in matching funding with project expenditure. Where projects rely on Chinese equipment, engineering, procurement or construction services, raising RMB can reduce currency mismatches and better align financing with project costs. In these cases, the benefit comes from financing structure rather than lower borrowing costs alone.

Market access is expanding, but challenges remain

Regulators in both the Chinese Mainland and Hong Kong have continued to refine the policy framework for cross-border RMB issuance. Reforms introduced in 2022 clarified how foreign issuers can use Panda bond proceeds, while Hong Kong's sustainable finance taxonomy has moved closer to international frameworks.

In practice, however, execution can still vary. Even where the regulatory framework permits a transaction, approval timelines, documentation requirements and case-specific considerations can influence how efficiently a deal is completed.

For international issuers, the key consideration is not simply whether RMB financing is available, but which issuance channel best fits their funding strategy. The answer depends on factors such as project expenditure, currency exposure, target investors and an issuer's readiness to meet the requirements of each market.

Three areas were identified to scale Dim Sum and Panda bond volumes while maintaining the credibility required to attract investment: simplifying regulatory requirements and minimising issuer costs, expanding and enhancing the investible opportunity set, and deepening the market.

These themes are explored in more detail in Climate Bonds' latest report , which provides additional market data and case studies on how different issuers are using RMB bond markets to support climate and sustainability objectives.

Till next time,

Climate Bonds