China plans yuan bond sales in London

The president and chief executive of HSBC China, David Liao, said that while there were still a few outstanding technical issues, such as the difference in price between onshore and offshore yuan, the addition of the currency to the SDR basket would help lubricate global trade as more banks and traders look to use the currency for trade finance. Renminbi is the official name of the Chinese currency, while yuan refers to the name of a unit of the renminbi currency. The point of such a change is for the trading session to overlap with European trading hours, as the worldwide Monetary Fund (IMF) calculates the FX value of SDR (special drawing rights) basket currencies at 12pm London time.

The China Foreign Exchange Trade System, managed by the People’s Bank of China, now closes at 4:30 p.m. Beijing time (8:30 a.m. GMT). The yuan already meets the first criterion. One major venue for banks to trade currencies with each other, ICAP-owned EBS IAP.L , said on Wednesday the yuan CNH= was now its third most traded currency after the euro and yen. It has also given offshore markets a window to trade on policy changes unveiled after domestic markets are closed. “I believe it cements London as the pre-eminent location for RMB trading and Chinese investment in the West”, he said and added, “Investors still had a huge appetite for trading offshore renminbi irrespective of the recent market volatility”. Chinese lenders including China Development Bank and China Construction Bank Corp. have previously issued yuan-denominated debt in London.

Traders in London said the extension would not affect them immediately, because they now trade the yuan through the offshore market and via non-deliverable forwards as most foreign traders can not directly access the onshore currency.

“The next move now would be to have more freedom to partake in onshore trading”. The ministry of finance didn’t respond to a fax request seeking comment on the proposed debt issuance in London.

It is unclear how much real impact the extended hours would have on investor sentiment in the near term.

Weighed down by a cooling property market, widespread factory overcapacity and high local debt levels, China is expected to report its slowest economic growth in a quarter of a century this year.