AIIB seeking credit rating as it moves to issue its first bond

The Beijing-headquartered Asian Infrastructure Investment Bank (AIIB) has indicated its ambition to issue its own bonds, possibly as early as the fourth quarter of 2017. As reported in the Nikkei Asian Review, the AIIB is eyeing up an initial bond issue of at least $US 1 billion.  The AIIB is engaging international credit ratings agencies to obtain the crucial ratings required before developing market awareness of and interest in the offering.

The AIIB is expected to follow the path of other major multilateral development banks, at least initially, and bonds are likely to be denominated in US dollars – not, as some have speculated, RMB.  It seems clear however that the AIIB is keeping the option open of issuing RMB denominated bonds in the longer-term. In November, the People’s Bank of China – China’s central bank – imposed capital controls that limited the withdrawal of RMB from the Chinese economy, which acted as a successful brake on the reduction of China’s foreign exchange reserves, in turn maintaining the RMB’s value against the US dollar and other international currencies.

Should the AIIB be successful in achieving a suitable credit rating for the bonds, there is likely to be a high level of interest among the international investor community, especially given the low ratings of many national Asian infrastructure development funds. This in turn could lead to further development of Asian infrastructure bonds issued by a range of institutions, filling a gap in western capital markets for bonds and underpinning debt capital financing of Asian infrastructure.

Joachim von Amsberg, AIIB’s Vice President, Policy and Strategy, will speak at Asia House on the new multilateral order and the role of the AIIB on 1 June.