China prepares to reopen its market to Russian companies

China is preparing to reopen its domestic bond market to Russian energy companies, a sign of deepening diplomatic and economic relations between the two countries, the Financial Times (FT) reported on Monday.

According to the British newspaper, Chinese financial market regulators indicated in a meeting with Russian executives held in Guangzhou at the end of August that they would support the issuance of bonds in Chinese currency (“panda bonds”) by large Russian energy groups.

This initiative would represent the first fundraising by Russian companies on China's public markets since the 2022 invasion of Ukraine , and the first such operation since Russian aluminum producer Rusal issued "panda bonds" worth 1.5 billion yuan (about 180 million euros) in 2017.

The project could initially involve two or three groups, including state-owned Rosatom and its affiliates, which are not covered by comprehensive Western sanctions, according to sources cited by the FT.

Gazprom, also involved, last week obtained a maximum credit rating (“AAA”) from the Chinese agency CSCI Pengyuan, a necessary step to access the market .

The move comes as China and Russia intensify strategic cooperation . On Tuesday, Chinese and Russian presidents Xi Jinping and Vladimir Putin met in Beijing and announced an agreement to build the Power of Siberia 2 gas pipeline , a project that could redefine global energy flows.

Most major Chinese banks have previously avoided financing Russian companies, fearing secondary sanctions from the United States. However, the yuan's growing importance as a foreign currency and close ties with Moscow are leading to a review of these restrictions.

Sources cited by the Financial Times warned, however, that legal risks persist: Chinese banks that broker these issues remain subject to potential sanctions from the U.S. Treasury Department, especially if the issuers are under direct sanctions.

In addition to Gazprom and Rosatom, other Russian energy companies, such as Novatek and Zarubezhneft, have already obtained credit ratings in China, according to the FT.

Contacted by the newspaper, entities such as the People's Bank of China, the China Securities Regulatory Commission and the National Association of Financial Market Institutional Investors did not comment.

The move comes at a time when Russia's access to Western financial markets is severely restricted , and could represent another step in Moscow's attempt to diversify funding sources and reduce its dependence on the dollar , the FT said.