After a rare zero issuance in Q1, Chinese banks' Tier-2 perpetual bond issuance
accelerated sharply in Q2, exceeding CNY1 trillion in aggregate. Issuance has
concentrated with large state-owned banks as the dominant issuers while small-
and medium-sized banks have slowed issuance amid downward pressure on capital
adequacy ratios. Smaller banks are pursuing alternate recapitalization
channels—convertible-bond conversions, injections via local government special
bonds and other innovative tools are accelerating. Market participants say the
issuer split reflects credit stratification and a reworking of regulatory logic,
highlighting more granular risk pricing and the urgency for smaller banks to
both raise capital and improve asset quality.
