Baidu Inc. successfully executed a $1.4 billion debt offering, timing the move strategically ahead of a $600 million debt repayment due in April. The deal concluded on Wednesday, capitalizing on investor enthusiasm surrounding China’s growing artificial intelligence (AI) sector.
The search engine giant secured attractive coupon rates of 2.7% for its five-year and 3% for its ten-year yuan-denominated notes, both 10 basis points lower than the rates obtained by rival Alibaba Group Holding Ltd. just a few months ago. This marks a significant development in the bond market, reflecting the growing investor confidence in Chinese technology stocks, particularly those tied to AI.
Baidu’s bond issuance highlights a broader trend in the market, fueled by a recent surge in tech stocks, particularly following breakthroughs such as DeepSeek’s advancements. The Chinese government’s shift in policy from strict regulation to strong support for innovative technologies has further bolstered investor sentiment, as it seeks to revive the country’s economy.
“This is a crucial moment for Baidu,” said Ting Meng, Senior Asia Credit Strategist at ANZ Bank China Co. “Investor sentiment in China’s tech sector has greatly improved this year, especially as the government’s stance has shifted toward fostering innovation rather than imposing restrictions.”
The offering, which targeted offshore investors, was Baidu’s first in nearly four years and marked its inaugural foray into dim sum bonds—denominated in Chinese yuan but issued offshore. The timing of the sale coincided with a rising demand for these bonds, which are seeing a surge due to low interest rates in China.
In 2024, dim sum bond sales reached a record 448 billion yuan ($61.8 billion), according to Bloomberg data dating back to 2007. This marks a significant milestone for the market, which continues to attract both domestic and international investors.
Looking ahead, analysts from Bloomberg Intelligence anticipate more debt issuance from Chinese tech companies. With an estimated $27 billion in capital expenditures planned for the sector in 2025, the demand for funding is expected to remain strong. Analysts Cecilia Chan and Jason Lee noted that the current advantage of cheaper funding costs in yuan bonds—about 220 basis points lower than dollar-denominated debt—could encourage other companies to follow Baidu’s lead.
“As seen with Baidu’s offering, the cheaper cost of yuan-denominated bonds is likely to attract more Chinese internet and tech issuers,” Chan and Lee wrote. “The continued investment in AI will be a key driver of bond sales for most Asian internet and tech companies this year.”
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