Dim Sum Bond Market Surpasses 1 Trillion Yuan: How Yield Inversion and Hedging Costs Drive the Expansion of the Offshore RMB Ecosystem
The yield inversion between China’s 10-year government bond yield falling below 1.7% and Japan’s breaking 3% has made dim sum bond financing cheaper than yen borrowing, driving the offshore RMB bond market to expand to 1 trillion yuan. Meanwhile, Midea Group’s nearly 6 billion yuan foreign exchange loss over six months and a 2.5% annualized hedging cost have prompted Chinese enterprises to deposit overseas profits directly into offshore RMB funds. Gan Tian told the South China Morning Post that these two parallel paths are expanding the ecosystem, but the Hong Kong dollar’s currency board arrangement and the exit of key participants from mBridge constitute structural constraints.
In early September 2026, Japan’s 10-year government bond yield broke through 3%, while China’s 10-year government bond yield fell below 1.7% during the same period. This yield inversion directly altered the financing choices of multinational corporations: for many years, global companies preferred borrowing in yen because Japanese interest rates were the lowest; now, the renminbi has become a cheaper funding currency. According to Gan Tian, Chief Executive of China Asset Management (Hong Kong), speaking to the South China Morning Post, global companies are flocking to Hong Kong to issue dim sum bonds—bonds denominated in offshore renminbi—because the financing costs are lower. The dim sum bond market has expanded to 1 trillion yuan, significantly exceeding Hong Kong’s traditional stock IPO market.
Yield arbitrage explains the expansion on the supply side, but the source of liquidity on the demand side is more specific. Gan Tian cited the example of Chinese home appliance maker Midea Group, which suffered nearly 6 billion yuan in foreign exchange losses over six months after earning profits overseas due to the depreciation of its held currencies. Typically, companies purchase financial hedges to protect against US dollar volatility, but this insurance can cost 2.5% of the hedged amount annually. Facing such costs, some Chinese enterprises have chosen not to convert their cash at all—instead directly depositing overseas profits into offshore RMB funds in Hong Kong. Gan Tian noted that this is a practical choice made by enterprises to reduce losses from exchange rate fluctuations.