Azernews.Az

By Bloomberg

China’s central bank may allow more foreign commerical financial institutions to sell yuan-denominated bonds in the onshore market as President Xi Jinping promotes the yuan’s challenge to the dollar’s supremacy.

Foreign issuers will no longer be required to sell the notes, known as panda bonds, via entities incorporated in China, the people said, asking not to be identified because the details are private. They also won’t need to have an onshore credit rating record.

China is opening up its bond market at a faster pace as it lobbies for the yuan to be included in the International Monetary Fund’s basket of reserve currencies. The relaxation of capital controls could potentially spur a 13-fold jump in panda bond issuance to about 100 billion yuan ($16.1 billion) by 2020, Deutsche Bank AG estimated last month.

“This would represent another very important step in capital market opening,” said Dariusz Kowalczyk, a Hong Kong- based strategist at Credit Agricole CIB. “Policy makers will continue to strive to liberalize the capital account and financial markets in coming months to qualify the renminbi for the Special Drawing Rights basket.”

Officials at People’s Bank of China’s press department didn’t immediately respond to a fax from Bloomberg seeking comment.

The IMF will conduct a review in November on whether to add the Chinese currency to its SDR basket, and 70 percent of votes are likely required to approve the yuan’s inclusion, an official at the organization said in June.

New Rules

The central bank on Tuesday issued new rules making it easier for big international investors to access its 35.3 trillion yuan interbank bond market. Daily trading volume was 356.5 billion yuan at the end of May, with only 2 percent of bonds in the hands of foreign institutions, including central banks, PBOC data show.

International Finance Corp., the World Bank’s Washington- based financing unit, plans an offering this year after opening the panda market in 2005. Daimler AG, the first non-financial issuer, expects additional sales.

There are only five outstanding panda bonds totaling 7.63 billion yuan, dwarfed by the total 39 trillion yuan in the entire onshore debt market. Daimler alone accounts for 4.5 billion yuan of the panda notes outstanding.

“Coming on the heels of the equity upheaval, the news may be interpreted as an attempt by Beijing to make it clear that the internationalization process will continue,” Kowalczyk said.