Kelvin Chan
Associated Press
HONG KONG (AP) – The World Bank is issuing its first bonds denominated in China’s yuan in Hong Kong, joining a growing number of borrowers tapping the new debt market as Beijing gradually promotes of its tightly controlled currency abroad.
The World Bank said buyers of its 500 million yuan ($76 million), two-year bond were mainly Hong Kong-based financial institutions, companies and wealthy individuals. It said the money will go into its general fund, rather than being raised for a specific purpose.
The yuan is not traded on global currency markets but Beijing has loosened controls and allows Hong Kong banks to use it. Hong Kong is Chinese territory but has its own currency and a Western-style legal system and often is used as a site for mainland companies to interact with foreign investors.
Beijing began allowing foreign companies to issue yuan debt last year. The Asian Development Bank, Caterpillar Inc. (CAT) and McDonald’s Corp. have sold yuan-denominated debt to finance activities in China.
Buyers of such bonds hope to gain from both interest payments and the growing strength of the yuan, which is rising against the U.S. dollar.
China is set to gain a bigger say in the World Bank after a restructuring last year to boost the voting power of developing countries. If approved, China will be the third-biggest voting power after the United States and Japan.The World Bank provides low-interest loans and technical assistance to developing countries.
Beijing is promoting Hong Kong as a platform for yuan-based international banking. Hong Kong banks started handling yuan in 2004 and now offer services ranging from deposits to credit cards to trade financing that allows foreign companies to pay Chinese business partners in yuan.
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