Research On The Arbitrage Of Overseas Dollar Debt Of China’s Non-financial Enterprises

In recent years,carry trade has become a hot topic,which is widely concerned in the international financial market.Since the 1990 s,the low interest rate or even zero interest rate of the yen has made the yen become the traditional carry currency,and the carry trade is prevalent.Between 2008 and 2014,the quantitative easing led by the United States sharply increased the liquidity of the us dollar,and at the same time,the interest rate of the us dollar reached a historical low.Therefore,the us dollar was also regarded as a low-cost currency for the carry trade.However,since 2018,the interest rate of the us dollar has started to rise,and the cost of arbitrage has increased.Many arbitrageurs have started to unwind their positions and exchange the currency back into the us dollar,which has reduced the heat of using dollar arbitrage.Due to emerging market countries have high interest rate differentials between currencies to the dollar,many companies began to try to issue offshore dollar debt,after will raise dollar back into the domestic currency exchange for domestic currency mismatch,the liabilities of foreign currency and local currency assets,not only can get spreads the benefits,in the case of currency appreciation,also can bring income for exchange rate changes.Carry trade is usually associated with financial institutions,because the huge risks associated with carry trade cannot be borne by ordinary enterprises.However,more and more literatures show that non-financial enterprises carry out arbitrage by issuing foreign currency bonds.China’s RMB is a traditional high-interest currency,so is there any arbitrage space for Chinese non-financial enterprises to issue us dollar bonds overseas? This is the focus of this paper.The research method adopted in this paper is the case analysis method.This paper firstly sorts out relevant theories and the development status of Chinese enterprises’ overseas dollar bonds,and summarizes the development of China’s overseas bonds.Secondly,this paper conducted descriptive statistics on the issuance of overseas us dollar bonds by Chinese nonfinancial enterprises from 2008 to 2017,and analyzed the feasibility of arbitrage.After that,this paper explains why the us dollar debt issued by sinopec group is selected for research,and gives a brief introduction to sinopec group.Then,this paper makes a detailed analysis of the specific cases of sinopec group to explore the purpose of issuing us dollar bonds,the possibility of arbitrage and the risks in the process of issuance.Finally,this paper provides relevant Suggestions for Chinese non-financial enterprises to issue offshore dollar bond arbitrage.Through the results of the case study,the main conclusions of this paper include: first,when there is a large spread between RMB and us dollar,Chinese non-financial enterprises are more inclined to issue offshore us dollar bonds;Second,there is a certain arbitrage space when Chinese non-financial enterprises carry out carry trade through us dollar debt.Third,the fluctuation of exchange rate,the narrowing of interest rate difference and the change of policy will have a great impact on the carry trade,and it is very likely to cause huge losses to the carry trade enterprises.Therefore,the enterprise should choose carefully dollar debt issuance of time,always pay attention to the change of national policy,and forward contracts and other ways to exchange rate risk to a minimum,while increasing the strength of the enterprise itself,decrease the dollar debt financing costs,to the stability of the revenues from the carry trade,and to prevent the happening of the loss.