China and Russia to edge closer to reducing US dollar reliance with Moscow set to launch first yuan bond
- Led by several banks including Gazprombank and China International Capital Corporation, the yuan-denominated bond could be launched this year
- Moscow is hoping to increase interest by Chinese investors’ in Russian assets, while it will give Chinese investors another investment opportunity
Moves by China and Russia to reduce reliance on the US dollar are set to continue at the end this year or early next year with the Ministry of Finance in Moscow likely to launch its first yuan-denominated bond.
“Currently, several banks led by Gazprombank and [China International Capital Corporation] are making efforts to realise this first yuan bond, [but] there are still some technical details we are working on,” said Cheng Daming, executive director at the China International Capital Corporation, one of China’s leading investment banks. “With some push, and joint efforts, we do believe we will realise this deal within the year or the beginning of next year.”
The Russian yuan-denominated bond will give Chinese investors another investment opportunity after China’s central bank updated rules on the Renminbi Qualified Domestic Institutional Investors scheme last year. This allows Chinese investors to buy yuan-denominated products in overseas markets, as long as yuan investments are not converted into foreign currencies.
“Because Chinese bond investors are not familiar with credit risk of Russia sovereign debt and the Moscow Stock Exchange, they need more time to get familiar with the whole deal structure, that might currently be the most important thing for this deal to take place,” Cheng added.