First yuan bonds issued in London

HSBC issued the first yuan-denominated bonds in London yesterday, furthering the UK's aim to become a yuan business centre.

The deal, a three-year bond that raised about 2 billion yuan (HK$2.45 billion), comes at a time when the UK government is eager to strengthen its trade and financial ties with the world's second-largest economy, having fallen behind Germany as a trading partner.

'As the world's leading financial centre, London is uniquely placed to assist China to further expanding the international use' of the yuan, UK Chancellor George Osborne said as British and Chinese financial institutions formally launch the offshore market initiative in London.

China has been encouraging yuan-denominated bonds to be issued in Hong Kong since 2007, and has allowed trades to be settled in yuan since 2009, as part of the country's efforts to internationalise its currency, also known as the renminbi.

Fallout from the 2008 financial crisis spurred Beijing to place the internationalisation of its currency, which is not easily convertible into other currencies, high on its agenda. Internationalisation means enabling individuals and companies outside the mainland to buy and sell yuan.

London, which is competing against places such as Singapore and New York to become an offshore yuan centre, aims to complement rather than compete with Hong Kong's role as the major offshore business centre for the yuan. Osborne said in Hong Kong in January that the two financial centres might form a tie-up that could include extended currency trading hours.

A recent report by the City of London said the City had already 'become the leading offshore yuan centre after Hong Kong', accounting for 26 per cent of global yuan foreign-exchange trading.