Victoria Harbour in the Hong Kong Special Administrative Region Photo: VCG

South China's Hainan Province has announced a plan to issue up to 5 billion yuan ($684 million) of offshore yuan local government bonds in the Hong Kong Special Administrative Region (HKSAR), with the proceeds to be invested in the maritime economy, environmental protection, livelihood projects and others.

Without mentioning the exact date, the Department of Finance of Hainan Province said in a statement that it will register and issue the bonds in October, and the bonds will be listed on the Hong Kong Stock Exchange. 

It will be the first time for Hainan to issue offshore local government bonds, and the bonds will be issued in two-, three- and five-year tenors. The two-year bonds are blue bonds, while the other two are sustainable development bonds.

The funds raised will be invested in the maritime economy, marine protection projects, environmental protection projects, healthcare, housing and other projects to ensure people's livelihoods, further implement the nation's ocean development strategy, and promote green, low-carbon and sustainable development, the provincial finance department said.

On the same day, Shenzhen in South China's Guangdong Province announced that it will issue up to 5 billion yuan of offshore yuan local government bonds in Hong Kong in the near future. The proceeds will be invested in projects including rail transportation and water pollution control to build a green Guangdong-Hong Kong-Macao Greater Bay Area, and promote green and low-carbon development.

It will be the second time for Shenzhen to issue offshore yuan local government bonds in the HKSAR. 

Hong Kong Chief Executive John Lee Ka-chiu said in a statement on Monday that the planned issues by Shenzhen and Hainan "fully demonstrate that Hong Kong is the premier platform for issuance of [yuan] debt products… It also increases the vibrancy of the offshore [yuan] bond market and promotes the internationalization of the [yuan]." 

Eddie Yue, chief executive of the Hong Kong Monetary Authority, said in a statement on Monday that Shenzhen's "successful inaugural issuance last year, which included a significant green portion, was well-received by investors and set a good example for other Chinese mainland local governments and corporates to issue bonds in Hong Kong."

It will become a trend for local governments in the Chinese mainland to issue yuan-denominated bonds in the HKSAR, said Cong Yi, dean of the School of Marxism at Tianjin University of Finance and Economics.

On the one hand, such issues have expanded the financing channels of local governments and the funds could better serve the industrial transformation of provinces and cities; On the other hand, the process could enrich the yuan-denominated financial product pool in the HKSAR, which has become the world's largest offshore yuan business hub, Cong told the Global Times on Tuesday.

"It's a great time to issue offshore yuan bonds, given the promising prospects of the yuan's internationalization. The yuan's share of global payments by value has been growing in recent years, demonstrating the currency's attractiveness among global investors," Cong noted.

Global Times