Pakistan will issue yuan-denominated “panda bonds” as early as June to further integrate its capital markets with China’s, a move that will help Beijing in its push to expand the use of the currency, the South Asian country’s finance minister said.
In an exclusive interview with the Post on Sunday, Muhammad Aurangzeb also pledged more cooperation with Beijing on the next phase of the China-Pakistan Economic Corridor (CPEC) – a key initiative for boosting bilateral trade and investment.
He also called for more participation from China’s private sector and export-led industries to transform Pakistan’s debt-laden economy.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
Aurangzeb said Pakistan aimed to raise US$200 million to US$250 million from Chinese investors, adding that it was “absolutely critical” for the nation to diversify its funding base.
The minister is in Hong Kong for the two-day Asian Financial Forum, which began on Monday.
“Since I took over [in March 2024], I have been very vocal about this – that we want to go for panda bonds, an inaugural sovereign panda bond … I’m pushing everyone, including our own teams, to see if we can get this done before June,” Aurangzeb said.
Panda bonds – typically denominated in yuan and issued in China by non-Chinese organisations, have gained traction as traders and countries seek to diversify from an over-reliance on the US dollar, while tapping into the world’s second-largest economy at attractive rates.
The minister added that Pakistan had followed Egypt’s lead to issue the yuan bonds on the back of credit improvement from the Beijing-led Asian Infrastructure Investment Bank (AIIB).
Last year, Egypt received guarantees from the AIIB and the African Development Bank, covering principal and interest, to issue panda bonds on the local mainland China market.
“I’ve met the president of the AIIB in Washington … with a very clear view that we will replicate what Egypt did in terms of the credit enhancement … which allows us to access the local capital markets for the panda bond,” he said.
Aurangzeb added that Pakistan would help to support the “internationalisation of the renminbi” and boost cooperation with the “second-largest and second-deepest capital market in the world”.
Despite its low credit rating, Pakistan is reportedly pursuing the issuance of eurobonds in the 2026 financial year. But Aurangzeb has said his administration will try to achieve a “single-B” category of at least one major rating agency.
Pakistan has endured years-long inflation and was pushed to the brink of default in 2023 as its economy withered amid political chaos and economic mismanagement.
But the country’s economy rebounded last year as the inflation rate dropped from nearly 38 per cent in May 2023 to 4.1 per cent last month.
The International Monetary Fund and Pakistan also reached an agreement on a 37-month extended bailout loan of about US$7 billion, with some of the country’s main debt holders, including China, agreeing to a one-year debt rollover last year.
Amid what he called the “balance of payment problem”, Aurangzeb said that enhancing CPEC 2.0 cooperation would be crucial, adding that the newest version of a flagship Belt and Road Initiative project would help the country digest its debt through an export-led model.
The CPEC is a key project under Beijing’s Belt and Road Initiative, with more than US$65 billion pledged for development in Pakistan, including roads and railways.
The second phase of the project, according to Pakistan, aims to set up special economic zones in partnership with China to reform the country’s agricultural and information technology sectors while attracting Chinese companies to relocate their low-end industries to the country.
During their meeting last June, Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif highlighted the upgrade to the CPEC project.
Aurangzeb said Pakistan was in trouble because the economy had been “primarily import-led”, which caused the country to “run out of foreign currency and get into a balance of payment problem”.
Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif meet in Beijing last June. Photo: Reuters. alt=Chinese President Xi Jinping and Pakistani Prime Minister Shehbaz Sharif meet in Beijing last June. Photo: Reuters.>
“Which means we have to fundamentally change the DNA of the economy towards export-led growth,” he added.
“CPEC phase two is all about primarily business-to-business, especially the economic zones. We want to make it work for some companies from the mainland to come in and use it as a real export hub.”
“CPEC phase one was all about the infrastructure, and that is where most of this debt came in … [If] we go into phase two, where we go into export industries … we can create enough dollars and … repay this debt,” he added.
Aurangzeb also pledged to step up security in his country to protect Chinese companies amid a series of deadly attacks in the region, with some targeting Chinese interests and personnel.
Additional reporting by Kandy Wong
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2025. South China Morning Post Publishers Ltd. All rights reserved.
Source: finance.yahoo.com