Global Market: Bank of China (Hong Kong) plans $3.3 billion onshore yuan debt issuance

Hong Kong plays a key role in China's efforts to internationalise the yuan by providing offshore liquidity and financial infrastructure for transactions in the currency.

The lender has become the first offshore yuan-clearing bank to receive an issuance quota for onshore NCDs, according to a statement from China's Interest Rate Self-Regulatory Mechanism, which the People's Bank of China oversees, as per the report.

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The bank plans to denominate all the instruments in yuan and will determine the size and maturity of each issuance based on market conditions and its own financing requirements, according to a separate statement issued this week.

NCDs are short-term debt instruments banks commonly issue to meet financing needs. The planned issuance would give Bank of China (Hong Kong) access to another funding channel in mainland China, potentially strengthening financial links between the onshore and offshore yuan markets.

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The move comes as Beijing and Hong Kong intensify efforts to establish the city as a leading offshore yuan centre. In July, authorities from both sides unveiled a series of measures to boost currency, bond and gold trading in Hong Kong amid heightened geopolitical tensions.

Hong Kong plays a key role in China's efforts to internationalise the yuan by providing offshore liquidity and financial infrastructure for transactions in the currency. Expanding funding options for financial institutions in the city could further support yuan-denominated business and cross-border investment, the report stated.

The yield on one-year NCDs stood at around 1.44%, while the Hong Kong offshore yuan interbank offered rate (HIBOR), a benchmark for yuan borrowing costs in the city, was approximately 1.78% this week.

The planned issuance underscores efforts to deepen integration between mainland China's financial markets and Hong Kong's offshore yuan market, as authorities seek to expand the international use of the Chinese currency, as per the report.