China launched a fresh fundraising push in Europe this week, aiming to secure up to €4 billion through a dual-tranche sale of euro-denominated sovereign bonds, according to Bloomberg.

The country’s Ministry of Finance began marketing the offer on Tuesday, locking in investor interest just two weeks after pulling in billions from a dollar bond sale that was swarmed by demand.

This time around, China is offering four-year and seven-year bonds. The initial price talk on the four-year notes has been set at about 28 basis points above mid-swap, while the seven-year tranche is targeting around 38 basis points, based on pricing guidance seen by market participants.

The transaction already pulled more than €50 billion in orders by midday in Hong Kong, signaling another massive book build for Chinese debt.

The offering serves multiple purposes for Beijing. It helps the government expand its sovereign euro yield curve, something it wants to deepen so that Chinese firms operating internationally can eventually reference it when issuing their own bonds.

While China has been more active in the dollar market, this euro push is designed to make its funding mix more flexible, especially as global investors chase higher returns and safer names.

Euro demand jumps as global buyers pile in

The timing of the sale is also no accident. China just completed a $4 billion U.S. dollar bond deal that drew orders nearly 30 times its size, even though the U.S. still has a stronger credit rating and dominates the global financial system. The euro sale rides on that momentum, boosted by signs of easing trade pressure with Washington, which has helped thaw investor appetite for Chinese paper.

Investors looking to diversify risk are piling into sovereign bonds. Lei Zhu, head of Asian fixed income at Fidelity, said demand is being driven by tighter spreads and higher returns.

“Global investors are snapping up Chinese sovereign bonds as part of a bigger play for diversification,” Lei said. “Euro assets are in high demand thanks to strong currency gains, tighter credit spreads, and attractive returns.”

That hunger for exposure in euros is critical for Beijing, since the euro bond market remains relatively shallow for Chinese issuers.

By taking the lead on sovereign deals, China hopes to give its corporate borrowers a real benchmark to lean on.

But while China is making noise abroad, things at home look rougher.

Domestic spending collapses as budget deficit widens

New data from China’s Ministry of Finance shows a huge drop in fiscal support in October, when both the general public budget and the government-managed fund fell 19% year-on-year, down to 2.37 trillion yuan, or about $334 billion.

That’s the largest monthly drop since early 2021, and the lowest amount spent in a single month since July 2023.

Also, in the first 10 months of 2025, government outlays climbed by only 5.2%, reaching 30.7 trillion yuan, while total revenue barely moved, inching up 0.2% to 22.1 trillion yuan.

A big piece of that weakness came from land sales, which dropped 6.5% compared to the same period last year. Combined, it left the country with a budget shortfall of 8.6 trillion yuan, more than 20% higher than last year.

And not all of that debt is pulling its weight.

Raymond Yeung, chief economist for Greater China at Australia & New Zealand Banking Group, said the government has been using a large share of bond proceeds just to refinance old debt instead of investing in real economic growth.

“This year, a large amount of the bonds issued was used for debt replacement instead of real economic activity,” Raymond said.

He warned that unless officials rework how public funds are being spent, there’s a risk that growth could stall heading into early 2026. “The Chinese government will need to review the spending pattern of the funds available,” said Raymond.

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