Renminbi Photo: VCG

China's Ministry of Finance (MOF) issued yuan-denominated treasury bonds worth 7.5 billion yuan ($1.13 billion) in the Hong Kong Special Administrative Region (HKSAR) on Wednesday, the first batch of the planned 23 billion yuan in issues this year.

The issuance was divided into three equal tranches of two-, five- and 10-year bonds. The MOF's bond issues in Hong Kong have stayed at about 20 billion yuan annually in recent years, but the 23-billion-yuan quota this year will be the highest in six years.

According to the Hong Kong Economic Times, the issue was 4.6 times oversubscribed, with total subscriptions of 34.42 billion yuan. The nearly five times oversubscription was higher than many previous issuances.

Investors' enthusiasm for the bonds comes as the stock and bond markets of major countries and regions have plunged in recent days due to surging inflations in the US, Europe and other markets.

By contrast, China's treasury bonds have been enjoying high credit ratings, maintaining a strong attraction among investors, experts said.

Also, the Chinese yuan has been setting new records as a share of global foreign exchange reserves. About 30 percent of the world's central banks plan to increase their yuan reserves over the next 24 months and 70 percent were considering doing so in the long term, reports said, citing an analysis from the Official Monetary and Financial Institutions Forum in July 2021.

It's in line with the internationalization progress of the yuan, Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology, told the Global Times on Wednesday.

Issuing treasury notes in Hong Kong also establishes a channel for the Chinese mainland to attract overseas capital, Dong said. China has been expanding its financing channels. Besides issuing yuan-denominated treasury bonds in Hong Kong, it has also issued bonds through financial markets in London and Luxembourg.

Hong Kong is the world's largest offshore yuan trading hub, processing 75 percent of global offshore yuan trades. The MOF started selling yuan-denominated treasury bonds in Hong Kong in 2009. As of the end of May, 238 billion yuan worth of yuan-denominated treasury bonds had been issued in Hong Kong. 

HKSAR Finance Secretary Paul Chan Mo-po said in a recent statement that "from the perspective of international trends, following the continuous expansion of the [China's] economy, the demand for yuan in international trade, investment and reserves will continue to grow. Hong Kong, as an offshore yuan hub, will play a more critical role."

The MOF plans to issue a total of 23 billion yuan of yuan-denominated bonds in four batches in Hong Kong this year, reports said.

Global Times