A subsidiary of China Resources, Beijing Land is issuing 120 million yuan (about HK$111.6 million) in corporate bonds, underscoring the red chip's attempt to cut foreign exchange exposure at a time of increasing fears of a yuan devaluation. The yuan-denominated bonds, to be sold in the mainland, are being issued by Beijing Land's 70.4 per cent held subsidiary Beijing Huayuan Property. A spokesman denied the move reflected the company's worries over a yuan devaluation, saying it was to take advantage of the narrowing interest rate gap between US dollar and yuan loans. 'The primary reason is to reduce interest costs because mainland borrowing costs have become lower after a spate of rate cuts this year,' he said. It was a refinancing of the company's US dollar borrowings into yuan loans to reduce its foreign currency exposure, he said. Last year, a convertible bond issue by Beijing Land raised US$172.5 million which was used by Huayuan to fund property development. The spokesman said Beijing Land had been buying back the bonds in the past two months in view of their low prices. He said the company's gearing would remain at 4 per cent following the issue. Fears of a devaluation of the yuan have accelerated with the black market rate sliding against the US dollar in the past two weeks. Many Hong Kong companies, especially those engaged in mainland infrastructure projects, have been looking into yuan loans in an attempt to cushion the impact of a possible devaluation. Huayuan said the bonds, which went on sale yesterday, carried a rate of 7.2 per cent. The proceeds will be used to fund a Dongguanying Minor District project in Beijing's Xicheng district. The scheme has been budgeted at five billion yuan. A listing for the bonds will be sought on the Shenzhen Stock Exchange.