China is to issue yuan-denominated sovereign bonds in London for the first time as it seeks a greater role for its currency in global trade and finance, according to people familiar with the matter.
The sale would be the first offshore issuance of the notes outside of Hong Kong and is expected to take place after the People’s Bank of China (PBOC) sells one-year bills in the British capital, said the people, who asked not to be named as the proposal has yet to be announced.
The central bank’s offering, which is being arranged by Industrial & Commercial Bank of China Ltd (中國工商銀行) and HSBC Holdings PLC, is due to take place by early next month.
“It’s time for China to broaden the sovereign bond market beyond Hong Kong,” China Everbright Bank Co (光大銀行) Hong Kong branch deputy head of treasury Ngan Kim-man (顏劍文) said.
“It’s quite a natural move and can bolster yuan usage in Europe. It’s part of the yuan internationalization strategy,” Ngan said.
Asia’s biggest economy is allowing global funds greater access to its domestic capital markets and broadening the range of yuan-denominated investments available offshore as it pushes for the currency to win reserve status at the IMF in a review next month.
Issuing notes in London will help cement the UK’s place as the yuan trading center for Europe as Paris and Frankfurt, Germany, compete for a share of the market.
London is the biggest yuan clearing center in Europe and trails only Hong Kong and Singapore in the offshore market, according to the Society for Worldwide Interbank Financial Telecommunication.
The PBOC is to sell as much as 5 billion yuan (US$787.7 million) of one-year bills in the UK within a month, which would be the central bank’s first issuance outside of the domestic market, people familiar with the matter said last week.
China’s planned sale of sovereign bonds was earlier reported by the Financial Times and comes before Chinese President Xi Jinping (習近平) pays his first state visit to the UK from Monday to Friday next week.
The Chinese Ministry of Finance did not respond to a request seeking comment.
In August, the yuan became the fourth most-used currency for global payments with a 2.79 percent share, surpassing the Japanese yen.
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