World Bank to offer first Chinese Yuan Bonds

Posted by Dave Landis on January 5th, 2011 in China | No Comments

The first step in promoting the internationalization of Chinese currency, the yuan or RMB 人民币, was announced by the World Bank.  The  first yuan-denominated bond will be offered to investors as way to diversify their currency holdings.

This move should not come as a surprise. China recently overtook Japan as the world’s second largest economy and they issued their first Yuan bonds in September.   This move by the World Bank to issue Yuan bonds will bring about increased international use of  Chinese currency.

Even though this is a first step, it is a small one, the bond amount the  World Bank will be issuing is only  500 million yuan ($75.9 million) over two years, reflecting the slow rate China is moving in this direction.

Claudia Calich, the head of emerging markets at Invesco Fixed Income said China “still a highly-controlled market, and this [deal] may be your way to get around it,” said “Gradually, [China] is opening up, but very slowly, with an emphasis on the word slowly.”

Over the past three years, a market for Yuan bonds became established in Hong Kong.   Hong Kong was a major financial  hub when a dependency of the British.   Since the former colony assumed Chinese control under the one country two systems scheme, it has played  an intermediary role between communist China and capitalist economies.

Undoubtedly , this first move will lead to more international financing in the Chinese currency.


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