China will allow overseas financial institutions to issue
Renminbi-denominated bonds, the government announced Thursday.
The decision is expected to make it much easier for foreign
banks to raise local currency for loans to overseas and domestic
companies.
Guo Shuqing, director of the State Administration of Foreign
Exchange, said earlier this week that the central government will
select certain international financial institutions to issue
Renminbi bonds for the first time in China's mainland.
The move will help foreign lenders, which have just been allowed
to provide Renminbi services to Chinese enterprises, to build up
their Renminbi capital reserves to serve a wider range of clients
amid the country's opening up of its financial markets.
Currently, banks can't raise enough local currency to meet
growing demand for Renminbi loans.
China pledged in its agreement to the World Trade Organization
that it would permit overseas banks to provide Renminbi services to
individual local clients by December 11, 2006.
Overseas banks can accept Renminbi deposits from foreign-funded
enterprises, expatriates and residents of Hong Kong, Macao and
Taiwan, and they can borrow up to 40 percent of their
Renminbi-denominated liability from the Chinese interbank funding
center.
"However, it is even more difficult for us to borrow Renminbi
lending in the interbank market as Chinese banks are reluctant to
lend Renminbi to us due to the higher reserve requirement demanded
by the central bank," said Timmy Leung of the Bank of East
Asia's.
The people's Bank of
China lifted the reserve requirement for banks and other
deposit-taking financial institutions from 6 percent to 7 percent
earlier this year.
(Shanghai Daily December 5, 2003)