Chinese companies are increasingly turning to bank loans as an affordable funding option amid market instability.

State-owned Poly Property Group is seeking a US$500 million offshore loan to refinance a 4% fixed-rate note maturing in November.

The loan, arranged by China Construction Bank, is expected to have a 2.5% interest margin.

Since April 2, following a tariff announcement by US President Donald Trump, at least seven offshore loans totaling US$1.9 billion have entered syndication.

Year-to-date, Chinese firms have secured US$9.5 billion in offshore syndicated loans, a 58% increase from the same period in 2024.

Bank loans are preferred over bonds due to their stability during external shocks like US-China trade tensions.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Chinese firms’ funding shift reflects a repeated pattern during external pressures

The move toward bank loans during trade tensions aligns with a historical pattern of Chinese companies adjusting funding strategies when facing external pressures.

China’s corporate sector already carries significant debt, with the corporate debt-to-GDP ratio having surged to 242%, making it the most indebted emerging economy globally 1.

This current shift reflects previous responses to market volatility, as bank loans provide stability when bond markets become volatile or expensive during periods of geopolitical tension.

The 58% increase in offshore syndicated facilities in 2025 compared to the previous year highlights the magnitude of this funding channel pivot, with companies securing $9.5 billion through such arrangements.

Companies like Poly Property Group can secure three-year term loans with a fixed margin of 2.5%, while the bond market demands much higher yields, as seen with Greentown China’s 8.45% bond issued in February.

2️⃣ Recent monetary policy adjustments significantly enhance bank lending capacity

China’s central bank has implemented substantial monetary easing measures that directly support the shift toward bank financing during market uncertainty.