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Slovenia plans to issue up to Rmb5bn ($700mn) of “panda bonds” next year as part of a strategy to further open up its economy amid intensifying trade tensions and industrial policy shifts in the US and China.
“We want to expand the investor base,” Slovenian finance minister Klemen Boštjančič told the Financial Times during a recent visit to Beijing where he laid out plans to issue renminbi-denominated sovereign debt sold in China.
Slovenia, a Eurozone member, is among a handful of countries to issue panda bonds — a format more commonly used by multinational companies. The move signals a desire to forge closer links with Beijing despite pressure from US President Donald Trump for Europe to take a tougher stance on China.
But Boštjančič said smaller countries such as his were much more exposed to the global trade disruptions caused by Washington’s “unprecedented” tariffs and Beijing rolling out sweeping export controls on critical raw materials.
“It’s something the world hasn’t seen for maybe even 100 years,” he said. “This is especially challenging for small, open economies like ours.”
He said that in such an environment, even small EU members must cultivate their own direct relationships with big countries such as China. “We increased bilateral meetings with Chinese officials because we cannot wait,” he said. “We have to protect our own interests.”
Foreign companies have increasingly turned to panda bonds, attracted by lower interest rates and a desire to diversify their currency issuance and investor base. Some sovereign borrowers including Portugal, Hungary and Egypt have also issued panda bonds in recent years, but it remains a sliver of the global sovereign debt market.
“This opens the market. It brings, especially the financial world, closer to one another,” the Slovenian finance minister said. “More [panda bonds] should follow, maybe on a yearly basis . . . It’s not just one event. We want to remain on the market.”
Slovenia, which was among the world’s first sovereigns to issue a blockchain based bond and offer a sustainability-linked issue, saw entering China’s capital markets as a logical next step, he said.
Boštjančič said he hoped the panda bond issuance would replicate the results Slovenia saw when issuing its first Samurai bonds in Japan.
Other policy shifts in China and the US were also reverberating in Europe, Boštjančič said, notably in taking steps to bolster domestic industries.
“The big question for Europe is how to cope, how to compete, when the playing field is very different in China or in the US,” he said. “Europe hasn’t been adapting to this, and this is a big question that Europe has to answer.”
Boštjančič said the bloc must be able to act more quickly. He suggested the EU could reconsider its deficit and spending limits, or launch new programmes to boost competitiveness.
“Countries like the United States and China are able to react very quickly and don’t have limitations like the EU has. Some of the limitations, most of them, we set by ourselves,” he said, giving the example of the car industry, which has been struggling to compete with China’s.
“For part of the European automobile industry, it’s probably too late. We wait too much. The rest of the world doesn’t wait.”
He suggested that subsidies could play a role if they formed part of a long-term strategy to boost competitiveness, but cautioned that Europe shouldn’t “just push money [into] some industries because the Chinese are doing this”.
“Europe must be able to make much bolder decisions than it used to in the past, otherwise we are seriously risking being left behind and driven over.”
Additional reporting by Ian Smith in London and William Sandlund in Hong Kong