The bonds, valued at 9 billion yuan ($1.3 billion) with maturities of two, three and 10 years, attracted bids from investors totaling 30.4 billion yuan, said the Hong Kong branch of Bank of Communications (Bocom), which acted as the sole agent for the sale.
“Given the current volatile interest rate environment, the yuan has become an important choice for international investors due to its stability and resilience,” said Bocom, the sole sales agent for 15 years. “This successful issuance reflects international investors’ recognition of China’s creditworthiness as well as their confidence in the sustainable and stable growth of Hong Kong’s economy.”
The demand is a good sign for the Ministry of Finance, which has announced plans to sell six bonds this year, raising 55 billion yuan in Hong Kong, up from 12 billion yuan in March, 11 billion yuan in June and 9 billion yuan last month.
The sale is a further step towards the global use of the yuan, also known as renminbi, which became the fifth member of the International Monetary Fund’s Special Drawing Rights (SDR) in October 2016 alongside the US dollar, the euro, the yen and the pound sterling.
The Special Drawing Rights (SDR) are an international reserve asset created by the IMF in 1969 to promote trade, increase liquidity, and supplement member countries’ official reserves during financial crises.
Numerous investors from mainland China have invested in the bonds via the cross-border investment channel with Hong Kong, the so-called Southbound Connect.
“Global institutional investors and certain central banks will invest in Chinese government bonds for diversification purposes,” said Wilson Chan Fung-cheung, deputy director of City University’s MBA program. “Hong Kong has successfully sold Ministry of Finance bonds for 15 years, and international investors view Hong Kong as the center of these issuances. This has strengthened Hong Kong as a global offshore yuan trading center.”
Tom Chan Pak-lam, permanent honorary president of the Institute of Securities Dealers, said the Ministry of Finance’s bond issuance in Hong Kong shows the country’s support for the city’s role as an international financial centre.
“It is positive for Hong Kong as a link between China and the world,” Chan said. “The HKMA has done a lot to promote the internationalization of the yuan, and the issuance of government bonds is part of that process.”
The Ministry of Finance has continuously increased the volume and frequency of its issuances in Hong Kong since selling the first debt in 2009, Bocom said, adding that these issuances “improve the benchmark yield curve and help drive the internationalization of the yuan in a steady, prudent and sound manner.”
In addition to government bonds, Chinese provincial authorities also plan to issue offshore yuan banknotes in Hong Kong.
