The UK government has today (Thursday 9 October) announced it has begun the process of issuing the world’s first non-Chinese sovereign bond in the Chinese currency, the renminbi (RMB).
Three major banks have been appointed by the government following a fair and rigorous process to help deliver the planned sale of Britain’s RMB bond.
This represents a decisive step towards issuing the first RMB denominated bond by a western country, and follows the Chancellor’s announcement at the recent annual economic summit between the UK and China in London.
The three banks that will assist the government in delivering the RMB bond deal are Bank of China, HSBC and Standard Chartered.
The proceeds of the bond will be used to finance the nation’s reserves. Currently, Britain only holds reserves in US dollars, euros, yen and Canadian dollars, so a British RMB sovereign bond signals the RMB’s potential as a future reserve currency.
Today’s announcement further cements Britain’s position as the western hub for RMB, and represents the next step in the government’s long term economic plan to establish Britain as the centre of global finance.
Britain is already the fastest growing market in Europe for RMB payments, more than doubling volumes from July 2013 to July 2014.
In 2013, total RMB foreign exchange trading in London averaged $25.3 billion per day, which was a 50 per cent increase from 2012.
Chancellor George Osborne said:
“Key to our long term economic plan is increasing our exports to fast growing economies like China, and attracting more investment to our shores.”
“To do that, we need to make sure China’s currency, the RMB, is used and traded here, as that will be not only good for China, but good for British jobs and investment too.”
“That’s why I’m delighted to announce we’re kicking off the deal for Britain’s RMB bond, the first by a western country. It’s another step in cementing Britain’s position as the centre of global finance.”
The bond will be issued in due course subject to market conditions, and further details of the transaction will be announced by the syndicate banks, the Bank of England and HM Treasury.
Britain’s sovereign RMB bond will be a stand-alone issuance and will be of benchmark size. It will contribute liquidity to the small but fast-growing offshore RMB market and attract other market players in both the private and official sectors.
The government continues to meet its domestic financing requirements entirely in sterling, consistent with the debt management objective to minimise the costs of meeting the government’s financing needs, subject to risk.
The Bank of England is acting as HM Treasury’s agent in managing the issuance of the renminbi bond.