Chinese technology firm Baidu plans to issue yuan-denominated bonds in offshore markets to repay existing debt and fund general corporate purposes, according to an exchange filing on Wednesday.

The exact size, interest rate and maturity of the offering would be determined later based on market conditions, the Beijing-based company said.

It would be Baidu's first bond offering since 2021 and comes ahead of a US$600 million debt maturing on April 7, according to Bloomberg data.

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Moody's on Wednesday assigned an A3 senior unsecured rating to the proposed notes, which it said reflected Baidu's strong position in China's artificial intelligence (AI) and online advertising sectors, plus its steady free cash flow. The grade also considered its disciplined acquisitions and resilience, as well as the challenges posed by intense market competition and high investment needs for AI expansion, the company added.

"The proposed issuance will extend Baidu's debt maturity profile, provide financial flexibility and expand its capacity to address its funding needs over the medium term," said Shawn Xiong, a Moody's vice-president and senior analyst.

"We expect the company will continue to maintain its prudent financial discipline and a solid credit profile, which will provide buffers against competition and its continued investment in AI."

Baidu last month reported a 2 per cent decline in revenue for the fourth quarter of 2024 and a 1 per cent drop for the year, as China's sluggish economic growth weighed on advertising spending. While its AI business remains a bright spot, competition has intensified.

Core online marketing revenue fell 3 per cent to 73 billion yuan (US$10 billion) in 2024, while non-online marketing revenue, mainly driven by its AI Cloud business, rose 12 per cent year on year to 31.7 billion yuan.

In recent months, Baidu has faced a rising AI rival in the form of start-up DeepSeek, which has received global attention for its low-cost, high-performance, open-source large language models.

"With our strategic foresight increasingly validated, we expect our AI investments to deliver more significant results in 2025," Robin Li Yanhong, Baidu's founder and CEO, said last month.

With Ernie Bot, Baidu was among the first Chinese companies to launch a local AI equivalent following OpenAI's ChatGPT release in late 2022.

After the overnight rise of DeepSeek, major tech companies from OpenAI to Alibaba Group Holding and Tencent Holding have rolled out new AI models at a rapid pace.

China would increase support for the application of AI models to drive further technological breakthroughs, Premier Li Qiang said on Wednesday while delivering his annual work report at the opening of the National People's Congress.

Baidu shares gained 1.7 per cent to HK$86.25 in Hong Kong on Wednesday morning.

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