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Bank takes step to increase international use of Chinese currency
China Construction Bank, the country's second-largest, is to release its first yuan-denominated "dim sum" bond in London as early as December in a move to increase international use of the Chinese currency.
It will be the first time a Chinese bank has issued a yuan-denominated bond outside China.
This comes as international use of the renminbi has increased significantly as the People's Bank of China, the country's central bank, encourages cross-border use of renminbi trade and investment, and as London aspires to be the western hub for renminbi business.
The first dim sum bond was issued by China Development Bank in July, 2007. Until July 2010, only Chinese mainland and Hong Kong banks could issue renminbi-denominated bonds; deregulation led to the development of an offshore market in renminbi and the internationalization of dim sum bonds. The bonds grew in popularity as the renminbi appreciated in 2011.
CCB plans to sell three-year dim sum notes to yield about 3.3 percent, Bloomberg News cited a person familiar with the matter as saying. A Fitch Ratings report on Nov 2 said it will use the proceeds to help develop its offshore yuan business.
An official with the bank's Beijing office, who declined to be named, told China Daily on Wednesday the dim sum bond issue would be as early as December.
Several foreign banks have already issued dim sum bonds in London.
HSBC issued the first such bond in April. Valued at 2 billion yuan ($318 million), the bond was also listed on the London Stock Exchange for private investors to buy. In August, the ANZ Banking Group issued a 1 billion yuan three-year dim sum bond.
The volume of renminbi business has been growing in London since January, when George Osborne, British Chancellor of the Exchequer, said his government aims to make London an offshore center for yuan trading.
A report by the City of London, the administrative body of the city's financial district, said companies are very interested in using renminbi products and services in London to generate savings. Using the Chinese currency will also help make doing business with China more straightforward, it said.
Mark Boleat, chairman of policy and resources at the City of London Corporation, said: "The City of London would be delighted to see China Construction Bank issuing a bond in London. We believe that Chinese banks have a very important role to play in developing the London market."
He said there is demand for dim sum issues in London from Asian and European investors, and an issuance from a big Chinese name such as CCB is likely to be attractive.
China Construction Bank recently joined the City of London initiative on London as a centre for renminbi business, and "we are working closely with the bank to support London's growth as an RMB centre", he said.
Standard Chartered launched the first global renminbi index last week to track progress of renminbi business activities worldwide. According to the index, the international use of the renminbi saw a 7-fold increase from December 2010 to September 2012.
Marios Maratheftis, the bank's global head of macro research, said: "Our view is that the renminbi is on an irreversible journey. It is becoming a major international currency that will play a substantial role in international trade and in central bank reserves."
Other Chinese banks, such as Industrial and Commercial Bank of China, the country's largest, and Bank of China, the third-largest, already have renminbi business in London. Individuals and companies are able to open renminbi accounts at the banks' branches in London, and can also settle cross-border trade with these banks.
Next month, major banks involved in the renminbi business, and monetary authorities from Hong Kong and the United Kingdom, will meet in London to discuss international use of the renminbi. The forum was established in talks between Osborne and the chief executive of the Hong Kong Monetary Authority, Norman Chan, earlier this year.
Wang Xiaotian in Beijing contributed to this story