Beijing Says China’s US Dollar Sovereign Bonds Will Spur Financial Opening

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The Ministry of Finance says that the issuance of China’s first batch of US dollar sovereign bonds in 13 years will help to drive the opening of the country’s finance sector, as well as shore up Hong Kong’s position as an international financial hub.

MoF plans to issue USD$2 billion in greenback bonds in Hong Kong – the first such issuance of US dollar debt by China since October 2004, including $1 billion in 5-year bonds, and $1 billion in 10-year bonds, all of which will be listed on the Hong Kong Stock Exchange.

A senior MoF official said to National Business Daily that the slated issuance would serve as a major event in the opening of China’s finance sector – one of the key themes for policymakers at the 19th National CCP Congress.

Lian Ping (连平), chief economist for the Bank of Communications, said that the issuance of US-dollar sovereign bonds by Beijing will provide a new investment and risk management tool to both domestic and overseas entities that will “enrich international capital market financial products, and enable international investors to share the fruits of China’s economic development.”

According to Lian this will help China to better integrate into the international economy and raise its level of financial opening.

MoF officials said that the central government’s issuance of foreign currency sovereign bonds to investors after a 13 year hiatus was a “major event for driving external opening of the financial sector at a new historic launching point, and possess major significance for the opening of the finance sector in both directions.”

The issuance will be of benefit to establishing a a pricing benchmark for China’s foreign-currency bonds and improve the yield curve for sovereign debt, providing Chinese enterprise with a key pricing reference when seeking international finance andimproving pricing efficiency.

MoF said that the issuance will also help to optimise the government’s debt structure and make it more balanced, given that as of the end of 2016 China’s central government external debt was USD$18.1 billion, comprising only 1.06% of total national debt.

In addition to abetting the opening of China’s finance sector and improving the national debt structure, MoF said that the decision to offer the bonds in Hong Kong would reinforce and upgrade the city’s position as an international financial sector.

Lian Ping said that choosing Hong Kong for the issuance would also help to strengthen Hong Kong’s position as an international hub for offshore RMB operations and its role as a global asset management centre.

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