China has said in recent months that it will wean itself off the dollar.
Now it is starting to put its money where its mouth is. The nation’s central bank announced on its web site Friday that it will allow more foreign companies to issue yuan-denominated bonds in China.
The People’s Bank of China also said it will encourage more Chinese financial institutions to participate in the domestic bond market.
The moves could boost activity in China’s bond market and increase global usage of the yuan, also known as the renminbi.
“Fundraising through selling renminbi bonds in China will help foreign institutions which plan to invest locally,” Rong Zhiping, head of bond trading at China Development Bank, the nation’s biggest long-term debt issuer after the finance ministry, told Bloomberg.
“Policymakers want to show they are willing to open the domestic financial markets wider.”
International Finance Corp., a unit of the World Bank, and the Asian Development Bank are the only international agencies currently issuing bonds in China, according to Chinabond, the Web site of the nation’s biggest debt-clearing house, as cited by Bloomberg.
China wants to lessen companies’ reliance on bank loans because of bad-loan crises in the past.
China is undertaking a number of measures to enhance the renminbi’s status.
“China is beginning an ambitious scheme to raise the role of the renminbi in international trade and finance and to reduce reliance on the U.S. dollar,” Qu Hongbin, China chief economist at HSBC, tells the Financial Times.
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