China allows 2 banks in HK to sell yuan bonds

[hugolp]

http://www.forbes.com/feeds/ap/2009/...ap6439027.html

China allows 2 banks in HK to sell yuan bonds
By JEREMIAH MARQUEZ , 05.19.09, 06:32 AM EDT

Two major banks outside mainland China said Tuesday they've become the first foreign companies granted approval to sell bonds in Chinese yuan - a step toward making it an international currency.

The banks - London-based HSBC Holdings ( HBC - news - people ) and Hong Kong-based Bank of East Asia ( BKEAF.PK - news - people ) - said in statements their subsidiaries in mainland China have been given permission by regulators to start issuing yuan-denominated bonds in Hong Kong.

Other details, including the amounts and timing of the offerings, weren't released.

It marks the first time firms based outside the mainland have been given the OK to sell such debt securities in Hong Kong, a move that furthers Beijing's goal of promoting the yuan as an alternative to the U.S. dollar for international trade and reserves.

Tight government controls largely restrict the yuan's use beyond China's borders, giving Beijing influence over the currency's exchange rate, though that's slowly changing.

Last month, the government announced plans to allow Shanghai and four other major cities to settle foreign trade in yuan - also known as the renminbi - rather than in dollars. The central bank has signed a string of agreements in recent months promising to lend yuan to Hong Kong, South Korea, Malaysia, Indonesia, Belarus and Argentina that could lead more firms importing from China to pay in yuan.

"The government is trying to become less reliant on U.S. dollars as a reserve currency, with a longer-term goal to make the renminbi a more global currency," said Kelvin Lau, regional economist at Standard Chartered ( SCBEF.PK - news - people ) Bank.

Letting HSBC and Bank of East Asia issue bonds in Hong Kong also meshes with Beijing's ambitions for its currency. Doing so helps develop overseas financial markets for the yuan, in turn boosting its liquidity and attractiveness among investors.
For the banks, it means more yuan to lend out and fund their own operations on the mainland.

"We believe that (a yuan) issue by HSBC China will help establish a representative pricing benchmark for foreign banks requiring funding, and will help the development of Hong Kong's offshore RMB market," Richard Yorke, chief executive of HSBC in China, said in a statement.

Beijing has expressed unease about the dominance of the greenback, which it uses for the bulk of its trade and to store an estimated one-half of its nearly $2 trillion in reserves.

China's central bank governor has called for a new global currency managed by the IMF to replace the dollar for trade and storing reserves. And in February, Premier Wen Jiabao appealed to Washington to avoid steps that might weaken the dollar or erode the value of China's holdings of Treasury bills and other dollar-denominated assets.

[sevin]

That's it. Those Chinese sons of a bitches are going down!

[tmosley]

Can Americans buy them? If so, how?

[ArchPaul]

are they fast tracking this or what?

[LibForestPaul]

maybe the fed will buy them as a reserve currency

[hugolp]

maybe the fed will buy them as a reserve currency

With what? worthless dollars?

[shenlu54]

Yuan is as worthless as dollar,it's also a fiat currency,althouth so far the value of which is artificially severely underestimated.

[hugolp]

Yuan is as worthless as dollar,it's also a fiat currency,althouth so far the value of which is artificially severely underestimated.

A fiat currency will tend to 0 at the end. It does not mean it wont have some value meanwhile. The coercion of the chinese goverment is there giving that value. It is intelligent to not trust that guarantee, but in the meanwhile the strengh of the country economy gives value to the fiat currency, and right now I would trust more the yuan than the US dollar. But who knows what central bankers will do at the end.

[HOLLYWOOD]

Why do you think investors are jumping into the Markets? When inflation hits, no one wants to be stuck holding the GREENBACK.

The dollar is doomed and globally the word is out to dump it as quietly as possible.

Don't be holding cash... ah, AMERICAN MONEY

[fj45lvr]

it called HOT POTATO.....don't get caught holding it.

[shenlu54]

A fiat currency will tend to 0 at the end. It does not mean it wont have some value meanwhile. The coercion of the chinese goverment is there giving that value. It is intelligent to not trust that guarantee, but in the meanwhile the strengh of the country economy gives value to the fiat currency, and right now I would trust more the yuan than the US dollar. But who knows what central bankers will do at the end.

Yes,you are right.

The serverly underestimated Yuan forces Chinese people work for American Corporations.So far it seems Yuan is better than dollar,it has more purchasing power,but can anyone trust a totalitarian government? At least Fed has to report to congress for his actions.

My suggestion, don't hold any paper money if you want to preserve your wealth for the future.