Industrial and Commercial Bank of China, the world's largest bank by market capitalisation, launched a yuan bond yesterday that was mainly distributed in Britain.
ICBC is promoting offshore yuan trade in London, bankers close to the offering said.
In April last year, the City of London - the formal name for London's financial district - launched an initiative to make the city a yuan trading hub.
In June this year, the People's Bank of China established a 200 billion yuan (HK$254 billion) currency-swap agreement with the Bank of England.
Then last month, London became the first city after Hong Kong to be allowed to invest directly in domestic securities in mainland China, after Beijing granted London-based institutional investors 80 billion yuan in quota through the renminbi qualified foreign institutional investor scheme.
Following a meeting with Vice-Premier Ma Kai, British Chancellor of the Exchequer George Osborne said at the time of the RQFII quota approval that he wanted to make London a Western hub for yuan trading.
ICBC's latest deal gives British investors access to yuan investment and earn income on their yuan holdings. Bankers expect more such bonds aimed at the London market, putting London in competition with Hong Kong as the centre for yuan bonds.
As a state-controlled policy bank and the world's biggest, ICBC is occasionally used by the central government to test new instruments and promote new policies. Last month, ICBC (Asia), ICBC's Hong Kong subsidiary, closed Asia's first Basel III compliant bond in US dollars, raising US$500 million.
ICBC's latest yuan bond was launched at a "benchmark" size, implying a deal in excess of 500 million yuan. Investor demand for the bond was robust, said bankers, indicating strong offshore appetite for yuan instruments, even as debt markets cool somewhat on renewed talk of tapering by the US Federal Reserve.
The debt comes in two tranches, at three and five years, which were indicated last night at a coupons of 3.6 per cent and 4 per cent, respectively. ICBC, JP Morgan, Standard Chartered and RBS led the transaction.