U.S. Dollar Debt Issuance by Chinese Firms

Abstract

From 2000 to 2015 there was a large increase in U.S. dollar debt issues by Chinese firms. Financial policy makers have been concerned about potentially serious negative consequences from this rapid growth in foreign currency corporate debt. We first observe that the average growth rate of these debts is reasonably similar to the growth of the Chinese economy itself and markedly slower than the growth of Yuan bonds. The firms undertaking U.S. debt issues have leverage reductions, not increases, despite the extra debt issued. These firms also increase real investment which may help to account for the leverage decline. There is little support for the idea that these Chinese firms are undertaking carry trade.

Keywords: debt issuance, capital control, corporate investment

JEL Classification: F34, G30, F38