Kazakhstan has become the first Central Asian country to ride a global surge in the popularity of issuing yuan-denominated debt despite persistent concerns about the implications of Beijing’s growing economic dominance abroad.
Officials at the People's Bank of China (PBOC), the country's central bank, have pledged to make so-called panda bonds, issued by foreign entities in Beijing’s onshore market, more accessible to investors.
Issuance has risen 60 percent in the first half of this year, exceeding 160 billion yuan ($23.6 billion), according to statistics published by PBOC. The attraction is China's accommodative monetary policy, which allows overseas issuers to raise funds at rates significantly lower -- often below 3 percent -- than they can on comparable dollar or euro markets.
By encouraging emerging markets and strategic partners to issue these bonds, Beijing not only advances its yuan internationalization goals, it also helps secure vital supply chains while cementing diplomatic and economic ties.
Enter Kazakhstan, which along with another Beijing ally, Pakistan, recently jumped into the market to be among the most prominent new entrants with its issuance of panda bonds through Samruk-Kazyna, the country’s sovereign wealth fund.
Samruk-Kazyna is the country’s largest state-owned fund, with assets of $88.6 billion under management at the end of 2025.
“This is our first entry into China’s domestic market," Nurlan Zhakupov, the fund’s chairman, said in announcing the move.
"The issuance demonstrated a high level of investor confidence in the fund and its financial resilience, and also marked an important milestone in strengthening the strategic partnership between Kazakhstan and China,” he added.
The decision to sell 3 billion yuan ($443 billion) came as even energy-rich Kazakhstan looked for more secure financial markets amid the economic fallout of the Iran war.
For Kazakhstan, the move aligns with the wider trend under President Qasym-Zhomart Toqaev of multi-vector foreign policy.
Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis, a French financial firm, told RFE/RL that “it fits [Astana’s] broader Eurasian engagement. It reinforces ‘de-dollarization’ trends and mutual trust but also raises questions in Western capitals about balancing relations.”
As US dollar -- and euro -- denominated funding becomes more uncertain during the Iran war, China’s onshore market has weathered much of the resulting volatility and offered a more stable alternative for foreign governments. Beyond that, China offers comparatively cheaper rates and easier access for countries aligned with Beijing.
Garcia-Herrero said deeper integration “ties repayment and refinancing to [yuan] dynamics and Chinese policy, giving Beijing leverage through potential refinancing terms, trade linkages … and diplomatic alignment.”
For China, meanwhile, the trend is an opportunity to internationalize the yuan, attract further investment, and advance its political influence over its close neighbors.
Those benefits were on display last month as just weeks after Russian President Vladimir Putin met with Chinese leader Xi Jinping in Beijing in May, Moscow launched its second round of yuan-denominated sovereign bonds in a sign of Russia's growing reliance on using Chinese currency instruments in the face of biting Western sanctions.
While rates for issuing yuan-denominated debt are lower, some analysts warn that the move comes with more risk than at first glance.
Yoan Raïh and Guiliu Luo, analysts at the Finance for Development Lab, note that the true cost of borrowing is almost always higher than expected.
"The apparent yield advantage narrows considerably once credit enhancement costs and currency hedging are factored in," they said in a recent analysis.
"Compared to domestic borrowing in local currency, Panda bonds are generally more expensive, not cheaper," they added.
Despite the risks, Pakistan has also looked to take advantage of the situation.
An adviser to Pakistani Finance Minister Khurram Schehzad wrote in a social media post that Islamabad had raised the equivalent of $250 million through its first panda-bond issuance.
For Islamabad, the economic benefits of cheaper rates and access to a considerable internal market are aided by political gains.
Murad Ali, professor of economics at the University of Malakand, said that access to Western markets “comes with lots of strings, political and financial. China is an easy-going creditor.”
Already riddled with debt, Pakistan’s ever-growing reliance on its largest creditor has prompted questions over Islamabad’s economic and political autonomy.
“There are apprehensions that, for the first time, this China-ization of Pakistan’s economic system means that there is less space for dissent,” said Ali. He added that states which are deeply integrated into Beijing’s market “feel inclined towards Chinese political ideology.”
Closer economic integration between Islamabad and Beijing has gone hand in hand with their diplomatic interests.
Since war broke out in the Middle East following US and Israeli strikes on Iran on February 28, China has attempted to mediate from afar through Pakistan and other allies in the Persian Gulf.
Islamabad, for its part, has sought to position itself as a stabilizing diplomatic force during the conflict.
China’s top diplomat, Wang Yi, praised Pakistan’s mediating efforts on July 16, speaking of their “indispensable role” in coordinating peace efforts.