PH borrows ₱19B from Chinese investors via bond float

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Metro Manila (CNN Philippines, May 16) — The Philippine government borrowed more money from the Chinese, this time by issuing new debt papers to investors. 

The Bureau of the Treasury said its return to the Chinese capital market allowed the government to raise 2.5 billion renminbi (about ₱19 billion) worth of debt papers. This marks the second time the Duterte administration tapped the panda bond market, following a similar issuance in March 2018 where it raised 1.46 billion renminbi (₱11 billion). 

The three-year papers were issued May 15 and are priced at 3.58 percent, just 32 basis points higher than the benchmark yield. 

Demand was overwhelming, as the Philippines received offers worth over 11 billion renminbi (about ₱84 billion). The government took this as a "strong vote of confidence" to the Philippine economy. 

“Such confidence by the global investor community stems from our solid creditworthiness brought about by the government’s unwavering commitment to sound macroeconomic policies and fiscal discipline in the face of domestic and external challenges,” Finance Secretary Carlos Dominguez III said in a statement. 

Some 42.4 percent of the debt placements were secured by investors based in China, while the remaining were snatched by overseas lenders, mostly commercial banks. 

The issuance comes shortly after the United States and China escalated their ongoing trade war, announcing even higher tariffs for imported goods sourced from the other. This has driven market jitters, which has pushed yields down for emerging markets. 

The panda bond offering comes just a week after the Philippines floated euro-denominated bonds to global investors, where it raised €750 million (about ₱44 billion). 

The Philippines borrows from both local and foreign sources to finance its spending plans and grow the economy. The Duterte administration has been actively tapping unexplored markets abroad for multiple funding sources. 

These debt notes are also on top of the $273.3 million official development assistance which the Philippines secured so far from China, which are meant to fund big-ticket infrastructure projects on the "Build, Build, Build" pipeline. 

WATCH: Senatorial candidates clash over China 'debt trap' issue

Critics of the administration have been questioning the credit lines from China, warning of a debt trap which they warn could lead to the Philippines ceding control of disputed islands should we fail to pay the billions worth of loans. But the government said that debt exposure to China remains modest despite these borrowings. 

The Treasury is also exploring the timing to issue fresh yen-denominated or samurai bonds to shore up more funding, this time from Japanese investors.