J.P. Morgan is constructive on the structural expansion of CNH dim sum bonds, with some long-duration and non-bank bonds offering spread advantages versus USD bonds

Overview

This report analyzes the supply, structure, valuation, and implications for the CNH rates and currency ecosystem of the offshore renminbi (CNH) dim sum bond market. J.P. Morgan believes the market has entered a phase of structural growth supported by RMB internationalization and expanding offshore liquidity; while overall valuation is rich versus USD bonds, selected issuers, non-bank financials, and long-dated bonds offer relative value.

Core views

The report first defines CNH dim sum bonds as RMB-denominated debt instruments issued outside mainland China, and finds that issuance has accelerated significantly over the past three years after earlier phases of expansion and contraction. The core driver is RMB internationalization: RMB settlement now accounts for approximately 29% of China's merchandise trade, while the offshore CNH liquidity pool reached RMB1.70 trillion (approximately US$252 billion) as of May 31, 2026. Since Southbound Bond Connect began in 2021, cumulative offshore investment has reached US$129 billion; average monthly outflows in the first half of 2026 rose to US$4.36 billion, above US$1.87 billion in 2025. The report believes RMB use in cross-border trade, increased offshore liquidity, and policy channels have jointly improved the environment for CNH issuance. In terms of market size and supply, the report estimates that outstanding CNH credit bonds have grown from RMB266 billion in 2021 to approximately RMB1.14 trillion (approximately US$169 billion); this measure excludes certificates of deposit, commercial paper, private placements, central bank bonds, and issues smaller than RMB700 million. By mid-August 2026, issuance had reached RMB291 billion and, at the current pace, could reach approximately RMB500 billion (approximately US$75 billion) for the full year, equivalent to roughly 40% of 2025 Asian USD bond issuance. CNH issuance also rose from RMB87 billion in 2020 to RMB391 billion in 2025. The report notes that corporates are using CNH as a funding and refinancing channel, with some Chinese issuers repaying maturing offshore USD bonds in CNH because all-in RMB funding costs are lower. Although offshore CNH issuance is typically still around 10–20bp wider than comparable onshore bonds, it provides issuers with offshore operations greater flexibility in deploying offshore funds. The market structure is also broadening and deepening. Year-to-date in 2026, non-Chinese issuers accounted for 24% of supply, up from 19% in 2016; excluding mainland China and Hong Kong, U.S. issuers represented 49% of non-Chinese issuance and Indonesian sovereign issuers accounted for 13%. By sector, sovereign issuers represented 31%, financial services 23%, and banks 8%; new sovereign issuers such as Indonesia and Portugal, as well as new corporate entrants including Nestlé, Deutsche Telekom, Singapore Airlines, and PSA International, have broadened the issuer base. Maturities remain concentrated in the 3–5-year segment, accounting for 65% of year-to-date 2026 issuance, but the share of long-term bonds exceeding 10 years has risen to 18%, from 5% a decade ago; JD.com issued its first 10-year CNH bond and Tencent its first 30-year CNH bond, reflecting corporates' extension of duration. In terms of ratings, approximately 49% of year-to-date 2026 issuance was unrated; rated issuance was predominantly investment grade, with A and A+ accounting for 22% and 21%, respectively. On valuation, the report notes that CNH bonds generally yield less than USD bonds, largely because the yield differential between U.S. Treasuries and Chinese government bonds has widened. To eliminate distortions caused by this benchmark-rate difference, the report uses cross-currency and floating-to-fixed swaps to convert CNH bond yields into USD-equivalent yields, adding approximately 287bp of yield. The charts show that nominal CNH bond yields are 365bp lower than China USD bonds; even after conversion to USD-equivalent yields, CNH bonds remain approximately 80bp more expensive than USD bonds on average at the index level. However, dispersion by issuer and maturity creates selective value: USD-equivalent asset-swap spreads on Chinese bank CNH bonds are generally within 10–20bp of comparable USD bonds; some non-bank financial institutions, such as brokers and asset managers, can offer more than 20bp of spread compensation versus USD bonds. Chinese and non-Chinese corporate bonds offer similar opportunities, particularly at the long end. The report uses Tencent as an example: its CNH 2056 bond has a USD-equivalent ASW of 228bp, more than 120bp wider than Tencent's USD 2060 bond at 107bp, a gap that cannot be explained by the four-year maturity difference. The report further places dim sum bond expansion within the framework of RMB internationalization. Although the RMB faced depreciation pressure from 2022 to 2025, CNH funding and the dim sum bond market have continued to grow rapidly since 2022, contrasting with the period after 2015 when RMB weakness coincided with lower demand for RMB assets, declining cross-border RMB use, and contraction in the offshore RMB bond market. The report believes internationalization drivers no longer depend solely on the exchange rate: geopolitical factors, the funding-cost advantage created by persistently low inflation and relatively accommodative monetary policy, RMB-denominated import growth outpacing exports, and regulatory easing of cross-border RMB transactions have all expanded the offshore CNH liquidity pool. A deeper offshore RMB bond market can increase investable RMB assets for international investors, facilitate the recycling of offshore RMB balances, and reinforce the RMB's role as a funding and investment currency; the report believes its near-term impact on the CNY exchange rate will be limited, but that it will provide financial infrastructure for more durable RMB demand over the longer term. For CNH rates and the cross-currency swap (CCS) market, the report believes that a larger offshore liquidity pool, spillovers from ample onshore liquidity, continued relatively accommodative central-bank policy, and a trend of “lower for longer” onshore yields will jointly depress CNH rates, narrow CNH–CNY spreads, and help anchor offshore funding costs while reducing CNH money-market volatility. Some dim sum bond issuance is asset-swapped back into USD and other currencies, creating persistent receiving-side flows in the CNH CCS market and exerting downward pressure on the curve. Although CCS is near multi-year lows and the marginal attractiveness of further asset swaps has declined, the report expects increased participation by foreign issuers to continue generating recurring receiving-side flows, limiting a meaningful rise in CNH CCS rates; progressively longer issuance maturities may also flatten the CNH CCS curve over time.

Analysis framework

The report sequentially examines the sources of offshore RMB liquidity, the size of the CNH bond market and new supply, structural changes including issuers and maturities, and then compares CNH bonds with USD bonds using post-swap USD-equivalent yields and asset-swap spreads. Finally, it explains the implications of dim sum bond expansion for RMB internationalization, CNH rates, and the CCS curve through the transmission channels of funding, liquidity, and asset-swap flows.

Methodology notes

• Industry/sector analysis frameworkSupply and demand framework

  Explains expansion of the CNH bond market through cross-border RMB settlement, offshore liquidity, policy channels, and new bond issuance supply.

  The report views expansion of the offshore RMB liquidity pool and rising issuance supply as the main foundations for changes in market size, funding costs, and maturity structure.

• Fixed income and credit analysisSpread analysis

  Converts CNH bonds into USD-equivalent yields and ASWs through cross-currency and floating-to-fixed swaps, then compares them with comparable USD bonds.

  This method removes the impact of China-U.S. risk-free rate differentials to identify yield and spread compensation in CNH bonds relative to USD bonds across issuers and maturities.

• Fixed income and credit analysisYield curve analysis

  Observes the impact of a rising share of long-term issuance and receiving-side asset-swap flows on the CNH CCS curve.

  The report believes that longer issuance duration may flatten the CCS curve, while asset-swap-related flows exert downward pressure on the curve level.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• CNH dim sum bond market

  RMB internationalization, expanding offshore liquidity, and policy channels support issuance growth; asset-swap activity affects CNH rates and the CCS market.

  Strengths

  Outstanding amounts and new issuance are growing rapidly, while issuer, sector, and maturity structures are all broadening.

  Weaknesses

  On a USD-equivalent yield basis, CNH bonds remain approximately 80bp more expensive than USD bonds on average at the index level.

  Comparison

  Nominal CNH bond yields are 365bp lower than China USD bonds; after swap conversion, they should be compared with comparable USD bonds.

• Tencent CNH 2056 bond

  The report cites it as an example of spread compensation in long-dated CNH corporate bonds relative to USD bonds.

  Strengths

  Its USD-equivalent ASW is 228bp, more than 120bp wider than Tencent's USD 2060 bond.

  Comparison

  Tencent's USD 2060 bond has an ASW of 107bp; the four-year maturity difference is insufficient to explain the spread gap.

Key data

• Offshore CNH liquidity poolRMB1.70 trillion (approximately US$252 billion)As of May 31, 2026.
• Outstanding CNH credit bondsApproximately RMB1.14 trillion (approximately US$169 billion)More than quadrupled from RMB266 billion in 2021; data as of August 17, 2026.
• 2026 CNH bond issuanceRMB291 billionAs of mid-August 2026; may reach approximately RMB500 billion for the full year.
• Southbound Bond Connect cumulative and average monthly outflowsUS$129 billion cumulatively; US$4.36 billion monthly average in the first half of 2026Average monthly outflows exceeded US$1.87 billion in 2025.
• Share of bonds exceeding 10 years18%Share of year-to-date 2026 issuance, versus 5% a decade ago.
• USD-equivalent conversion adjustment for CNH bondsApproximately 287bpIncremental yield obtained through cross-currency and floating-to-fixed swap conversion.
• Tencent relative spread exampleCNH 2056 bond ASW+228bp; USD 2060 bond ASW+107bpThe CNH bond is more than 120bp wider than the USD bond.

Impact & implications

The report believes that expansion of the dim sum bond market can enhance the investability of offshore RMB assets and the efficiency of RMB fund recycling, reinforcing the RMB's role as a funding and investment currency. For fixed-income markets, CNH bonds are not broadly cheap versus USD bonds on an overall valuation basis, but individual-bond spread dispersion among non-bank financials, corporates, long-dated bonds, and non-Chinese issuers may create relative value; for CNH rates and CCS, liquidity expansion and asset-swap flows tend to lower rates and limit CCS upside.