Beijing to Sell First Yuan Bonds in Hong Kong

BEIJING — China will sell some $876 million of government bonds denominated in the mainland's yuan for the first time in Hong Kong this month, the Finance Ministry said Tuesday, in a move to expand the international use of its tightly controlled currency.

The 6 billion yuan ($876 million) bond sale is slated for Sept. 28, the ministry said. Hong Kong is Chinese territory but has its own currency and regulatory system and often is used by Chinese companies to deal with foreign investors.

An employee counts renminbi banknotes at a branch of Bank of China in Changzhi, Shanxi province. (Photo: Reuters)

The yuan, also known as the renminbi, or people's money, does not trade on global markets despite China's huge foreign trade, but Beijing is gradually expanding its use abroad. Chinese officials are concerned about the stability of the dominant US dollar and have called for the creation of a new global reserve currency.

The bond sale is "certainly a push to internationalize the renminbi," said Zhang Bin, a specialist in international finance at the Chinese Academy of Social Sciences, a government think tank. "It will increase renminbi business overseas and be conducive to the development of renminbi markets."

Beijing signed a currency swap deal with Argentina in March and has promised to lend yuan to the central banks of South Korea, Malaysia, Indonesia and Belarus in the event of a financial emergency. That could lead to the currency's use in private transactions.

A few mainland institutions, including state-owned China Construction Bank Ltd. and Bank of China Ltd, have issued yuan-denominated bonds in Hong Kong.

Premier Wen Jiabao, the mainland's top economic official, has promised to strengthen trade and finance links with Hong Kong. Other officials have said it might become the center for handling finance in yuan outside the mainland.

"This measure has significant impact on promoting the depth and breadth of the Hong Kong bond market and strengthening Hong Kong's position as an international financial center," the territory's government said in a statement.

The Finance Ministry gave no details of who would handle the bond issue.

Two banks—London-based HSBC Holdings and Hong Kong-based Bank of East Asia—said in May they had become the first nonmainland companies approved to sell yuan bonds.