The bond, known as sukuk, is to be launched within the next few months and will be the first of its kind available in China.
Speaking to Associated Press, Salman Younis, executive director of KFH, said that the Chinese market had huge potential for Islamic banking products.
"It will be the first ever sukuk issue in China," he said.
"The potential in China is large because it is a totally untapped market for Islamic finance, and we are also looking at investing in real estate and private equities in China."
The bonds operate under Shariah law, allowing the investor to make a profit but without accumulating interest.
They operate on an exchange in an approved asset that allows investors to earn profits from transactions.
In a further shift towards Asia, KFH also announced plans to expand its Islamic banking services into Indonesia, the world's largest Muslim nation.
The Islamic banking giant is based in the Middle East, and has until now focussed its efforts in providing banking services there, but is now turning its attentions to the rest of the world.