FT: China set to issue sovereign debt in renminbi in London

China is to issue yuan-denominated sovereign bonds in London for the first time as it seeks a greater role for its currency in global trade and finance, according to people familiar with the matter. The scheme is likely to be announced next week when China’s President Xi Jinping visits the United Kingdom It wouldn’t, however, be the first ever renminbi debt program in London.

China Construction Bank, the nation’s second-largest lender, issued 1 billion yuan of two-year bonds in London this week at 4.3 percent, according to data compiled by Bloomberg.

China has chosen London as the first overseas centre where it will open a sovereign debt market in its attempt to popularise the RMB.

Asked on the sidelines of a banking seminar on China if Britain supported the yuan’s admission, Braddick said: “I personally think there is a sound evidence base, but the International Monetary Fund will need to look at it in considerably more detail”.

China is finally seeing more borrowing and lending activities after a series of interest rate and reserve ratio cuts by the People’s Bank of China.

Increasing access to Chinese markets raises its own set of concerns, though. “Britain and China – we will stick together”, he declared triumphantly in Beijing less than a month after China’s so-called “Black Monday.”

Xiao Licheng, an assistant research fellow at the worldwide Finance Division of the Chinese Academy of Social Sciences, said the PBOC has implemented several measures for the renminbi’s inclusion in the SDR basket of currencies, and extending the trading hours when the yuan’s rate becomes stabilized will further improve the currency’s global standing.

But many observers point out that even if the yuan were included in the SDR, significant hurdles would still need to be cleared before central banks would consider using it as a reserve currency.

The SDR now comprises four currencies, the USA dollar, the euro, the British pound and the Japanese yen. Amid equity market volatility, the PBOC has repeatedly adjusted the value of the currency, initially pitching it as a “one-off depreciation”.

The securities will not be the first renminbi debt issues seen in London. If the Chinese foreign ministry’s rhetoric is to be believed, we’re about to witness the start of a “golden era” in U.K.-China ties.