Two major banks outside mainland China said Tuesday they've become the first foreign companies granted approval to sell bonds in Chinese yuan - a step toward making it an international currency.
The banks - London-based HSBC Holdings and Hong Kong-based Bank of East Asia - said in statements their subsidiaries in mainland China have been given permission by regulators to start issuing yuan-denominated bonds in Hong Kong.
Other details, including the amounts and timing of the offerings, weren't released.
It marks the first time firms based outside the mainland have been given the OK to sell such debt securities in Hong Kong, a move that furthers Beijing's goal of promoting the yuan as an alternative to the U.S. dollar for international trade and reserves.
Tight government controls largely restrict the yuan's use beyond China's borders, giving Beijing influence over the currency's exchange rate, though that's slowly changing.
Last month, the government announced plans to allow Shanghai and four other major cities to settle foreign trade in yuan - also known as the renminbi - rather than in dollars. The central bank has signed a string of agreements in recent months promising to lend yuan to Hong Kong, South Korea, Malaysia, Indonesia, Belarus and Argentina that could lead more firms importing from China to pay in yuan.
"The government is trying to become less reliant on U.S. dollars as a reserve currency, with a longer-term goal to make the renminbi a more global currency," said Kelvin Lau, regional economist at Standard Chartered ( SCBEF.PK - news - people ) Bank.
Letting HSBC and Bank of East Asia issue bonds in Hong Kong also meshes with Beijing's ambitions for its currency. Doing so helps develop overseas financial markets for the yuan, in turn boosting its liquidity and attractiveness among investors.
For the banks, it means more yuan to lend out and fund their own operations on the mainland, and for Hong Kong an expanded role as a center for offshore yuan financing and trade.
The southern territory, which has a separate currency and banking system but often serves as a testing ground for China, is currently the only location outside the mainland that permits yuan bank accounts. The first yuan bonds sold overseas, by Chinese companies including Bank of China and China Construction Bank, were issued in Hong Kong in recent years.
"If we can develop a (yuan) bond market, it will significantly increase Hong Kong's important as a financial center," HSBC's chief executive Michael Geoghegan said Tuesday at the company's offices in Hong Kong. "It's a significant step forward."
Beijing has expressed unease about the dominance of the greenback, which it uses for the bulk of its trade and to store an estimated one-half of its nearly $2 trillion in reserves.
China's central bank governor has called for a new global currency managed by the IMF to replace the dollar for trade and storing reserves. And in February, Premier Wen Jiabao appealed to Washington to avoid steps that might weaken the dollar or erode the value of China's holdings of Treasury bills and other dollar-denominated assets.
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