China Launches Yuan Bond in London

by Marilou Moursund on October 21, 2015

in currencies,Foreign Markets,Geopolitical

China is launching a charm initiative as well as a yuan bond sale in London.  It is no coincidence that the state visit, including a state dinner at Buckingham Palace, has taken place at the same time as the first yuan bond sale held outside of China or Hong Kong.  From the linked article:

The People’s Bank of China on Tuesday launched a yuan-denominated bond in London for the first time as it seeks to internationalise its currency.

The debt sale worth 5.0 billion yuan (690 million euros) for one-year bonds was heavily oversubscribed according to a banking source.

The auction for the bonds offering a yield of 3.15 percent coincided with the start of a four-day visit to Britain by Chinese President Xi Jinping.

Bloomberg has a very interesting article about London becoming the center for renmibi trading.  From the article:

That doesn’t seem to be a problem anymore. As the U.K. capital hosts Chinese President Xi Jinping this week, a ranking People’s Bank of China official told a British executive that the central bank already expects London to be the worldwide center for renminbi trading. The London executive asked not to be named, citing confidentiality.

U.K. executives care about relations with China because its economy is widely expected to regain its 19th century role as the world’s largest. And while its currency wasn’t even allowed outside its own borders before 2004, China is opening up now, spurring predictions that the renminbi will become a reserve currency eventually rivaling the dollar. London already has 40 percent of global foreign-exchange trading and wants to build on its dominant position by grabbing a major share of offshore renminbi trading.

“We’re seeing the internationalization of the renminbi growing at a pretty brisk pace here,” said Standard Chartered Europe Chief Executive Officer Richard Holmes. “There’s a lot of runway. There’s a lot further to go. And that’s due to what I view as the end of U.S. dominance.”

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