Govt plans 6b yuan bond float in HK

(China Daily)

Updated: 2009-09-09 08:10

The Ministry of Finance said it plans to offer 6 billion yuan of government bonds in Hong Kong for the first time to elevate the "international status" of its currency.

The sale on Sept 28 to individuals and institutions will encourage acceptance of the yuan for global trade and promote growth of Hong Kong's fixed-income market, according to a statement from the ministry.

"The move will help expand yuan investment channels outside the mainland and promote cross-border yuan settlement," said Shi Lei, analyst, Bank of China. "It's an important step in the long-term mission of making the yuan fully convertible."

China is promoting greater use of the yuan overseas after Premier Wen Jiabao expressed concern in March that the US dollar would weaken, eroding the value of its $2.1 trillion in foreign-exchange reserves. Brazil, Russia and India have also said the world is too reliant on the greenback.

The yuan is little changed this year against the dollar after rising 21 percent since a fixed rate was scrapped in July 2005 through to Dec 31, 2008.

The city's residents have been seeking ways to profit from a stronger Chinese currency. Hong Kong's yuan deposits increased by 932 million yuan to 54.4 billion yuan in June, official figures show.

HSBC Holdings Plc and Bank of East Asia Ltd sold 6 billion yuan of bonds in Hong Kong this year. HSBC Bank (China) Co said yesterday it received orders for 4.4 times the amount of debt it planned to sell, allowing it to raise 2 billion yuan.

The government bond sale will help "improve the international status of the yuan, promote development of the yuan bond market in Hong Kong, and help provide a pricing benchmark for mainland institutions' bond sales in Hong Kong", according to the statement from the Ministry of Finance, which didn't give the maturities of the securities.

The government may sell up to 100 billion yuan of government bonds in Hong Kong over several stages, the city's Standard newspaper reported yesterday before the official announcement was made, citing people it didn't identify.

Hong Kong is seeking to become an offshore center for the yuan. The issuance announced yesterday is "a new milestone" for developing yuan business in the city, said the government of the Hong Kong Special Administrative Region.

Bloomberg News

(China Daily 09/09/2009 page13)