Bankers say the government's record 23 billion yuan (HK$28.2 billion) dim sum bond offer will boost the city as an offshore yuan trading centre and cement the renminbi as a true international currency.
The fourth China sovereign bond tender announced in the city on Thursday not only marks the largest offer in terms of size, it's also the first time that overseas central banks have been offered bonds. More than five central banks have subscribed to the two billion yuan tranche, meaning the yuan has started to become a reserve currency investment.
The HKMA did not say which central banks were taking up the offer, but sources told the South China Morning Post it was popular with central banks from Asia to Africa.
'This is better than expected as many central banks have not yet accepted currencies which aren't convertible as their reserve investment,' said Andrew Fung, executive director of Hang Seng Bank. 'At least some central banks are now taking the yuan seriously as a small part of their reserve currency. More central banks will do so in future as the mainland further liberalises the yuan.'
The yuan is not yet freely convertible, which is why a majority of central banks have not yet invested in the currency. They want to make sure their reserves are invested in liquid and freely traded currencies such as the US dollar, euro and yen. China since 2009 has gradually allowed the yuan to be used to settle cross-border trade and investment and ultimately wants the currency to become a reserve currency for major central banks. The euro-zone crisis and the low interest rate offered by US Treasuries have helped the yuan as an alternative asset.
'Beijing is now allowing Hong Kong to play the role of a gateway for overseas central banks to invest in dim sum bonds and other yuan assets,' Fung said.