Tuesday, September 8, 2009

Alert: China to Issue Renminbi Bonds Internationally

It's only a first step but, this is big. A new player has entered the ring to compete against the dollar and Treasury securities.

China’s finance ministry said China will issue Rmb6bn ($879m) of bonds in Hong Kong on September 28, in a move to “improve the international status” of the currency and to help mainland companies raise funds in the offshore bond market, according to FT.


  1. Are these central government bonds that will be used to fund state-owned enterprises? Otherwise, how do central government bonds assist local companies in raising funds in the bond market?

  2. I think what they are getting at is that some funds will only buy government securities. Thus, issuing gvt Rmb denominated paper will provide an opportunity for these type palyers to participate in the Chinese currency and thus add to its respectability.

    You are probably on to something as to whether this needs to be done to help local companies, ut it is just part of their cover story for issuing the debt, which is really all about competing against the dollar and dollar denominated debt.

  3. Sometimes the best way out of a bad trade is to spread your way out. Being long US treasuries and short Renminbi bonds would reduce the pressure to sell their US holdings. Of course a new player will depress demand for US paper so it will take a long time to get it done.