Panda Bonds ~ Ever Heard of Them?
It never ceases to amaze me how naive the B.C. Government is or thinks we are. Panda Bonds are issued by the B.C. Government in yuan in mainland China and of course these bonds earn interest to the bond holders. The proceeds from the bond sales are then reinvested in Asian markets at a higher interest rate which generates revenue for B.C. or supposedly you and me. I wonder why the Chinese don't just invest directly into the “Asian markets” to earn the higher interest themselves? By the way, there are also “Dim Sum” bonds”, cute and innocuous names aren't they?
These Panda Bonds are all legit though because they are sold by the Ministry of Finance which looks after the provinces finances on our behalf. B.C. isn't the only jurisdiction to sell these Panda Bonds but according to my research it was one of the first to sell these types of bonds directly to mainland China in yuan.
So what's the problem? Well...
These bonds are supposedly sold to institutions like banks and insurance companies and not to individuals. Of course, a secondary market usually develops for investment instruments like this so who knows where they end up. There are some conspiracy theories floating around concerning Panda Bonds. Skeptics claim that these Panda Bonds are used by Chinese investors in Canada as collateral to buy houses.
“I think they can rule out that the initial buyers, it’s not like they’re directly selling to high net worth individuals, but I think [the province] might need to do a little bit more homework to say for sure that the ultimate buyers aren’t high net worth individuals that they can post against purchases in the Vancouver market.”
Tom Davidoff from UBC’s Sauder School of Business.
Others claim that this presents a perfect opportunity for money laundering. Naturally the B.C. Government sees no opportunity for wrong doing here by these bond holders.
Apparently the purpose for the B.C. Government issuing these bonds in the first place is to deepen ties with the Chinese government, gain greater market access and to help B.C. businesses abroad. Other non-government observers consider panda bonds to be the biggest scam ever. As always, the truth probably lies somewhere in the middle.
The point is that there's a lot going on that the average citizen has no idea about or simply doesn't care. As guardians of the public trust, the B.C. Government is supposed to be acting in our best interest but as we'll see in subsequent articles, this isn't always the case. In fact, what the citizens of B.C. are told is going on is simply not the whole truth. Our provincial government is complicit in the escalating home prices in these past few years and I'll explain how next week.
Partial Source:Lynda Steele: Are B.C. government issued “Panda Bonds” funnelling Chinese cash into the country?
June 29, 2016.