Jakarta. Indonesia will allow the Chinese government to issue sovereign bonds in its domestic financial market on a reciprocal basis, Finance Minister Purbaya Yudhi Sadewa said on Tuesday.

Indonesia has also been pursuing plans to issue similar debt instruments in China’s financial market.

Cross-border bond issuance was a key topic during bilateral talks between Purbaya and Chinese Finance Minister Lan Fo'an on the sidelines of the Spring Meetings of the International Monetary Fund and World Bank in the United States last week.

“China asked whether they would be allowed to issue bonds in Indonesia. I said yes, but on a reciprocal basis,” Purbaya told reporters in Jakarta.

“China is our largest trading partner, so the outcome of the discussion was very positive,” he added.

Indonesia had previously announced plans to issue Panda Bonds in China, citing the country’s competitive interest rates.

“We also said we want to issue Panda Bonds there. He (the Chinese finance minister) strongly agreed, and borrowing costs in China are low, only around 2.3%. So we can reduce our cost of capital,” Purbaya said.

He added that the proposed China bond issuance also became a negotiating tool during meetings with US fixed-income investors.

According to Purbaya, the availability of lower-cost funding alternatives strengthened Indonesia’s bargaining position with global investors.

The strategy, he said, helped drive a sharp increase in incoming bids for Indonesian bonds.

“I shared that information with bond investors in the United States as well. Put diplomatically, if you do not want to buy, other investors are willing to do so at even lower rates,” he said.

“That was part of our negotiation strategy, and it immediately increased incoming bids significantly.”

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