George Osborne yesterday hired Standard Chartered, HSBC and the Bank of China to find investors for the British government’s first ever Chinese-currency bond.
The exact sum has not been disclosed, but the Treasury is expected to try to raise 2bn renminbi (RMB) – £200m – in the issue, known as a dim sum bond.
It is part of a drive to make sure the UK and the City of London become the world’s leading off-shore centre for trading the currency, as China’s economic clout grows.
The chancellor has widened the government’s sources of funding in a bid to promote the UK as a hub for foreign finance. A year ago, he announced the UK would become the first non-Islamic state to issue a sukuk, raising £200m with the sharia-compliant bond.
“Key to our long-term economic plan is increasing our exports to fast growing economies like China, and attracting more investment to our shores,” Osborne said yesterday.
“To do that, we need to make sure China’s currency, the RMB, is used and traded here, as that will be not only good for China, but good for British jobs and investment, too.”
The funds raised in this bond issue will be used to build currency reserves in the renminbi. Currently, the government has reserves only in euros, US dollars, Canadian dollars and Japanese yen.
The banks were chosen to work on the deal because of their experience in Chinese finance.
“The willingness of the UK Government to issue in RMB demonstrates London’s further development as a leading offshore renminbi centre,” said Standard Chartered’s deputy chief Mike Rees. “It will strengthen the already deep connections between UK business and Asia and will be another significant moment in the RMB’s continuing internationalisation.”
BEHIND THE DEAL
HSBC | CHRIS JONES
1 Jones is a managing director and is global head of local currency syndicate, and will head HSBC’s team on this bookrunning.
2 His recent big deals include a 1.6bn renminbi bond for the International Bank for Reconstruction and Development, and a pair of bonds totalling 3.25bn renminbi for International Finance Corp.
3 Jones has worked at HSBC for the past eight years on deals across Europe and Asia, and his 17-year banking career also included time working for Deutsche Bank.
Standard Chartered is also working on the bond issue. Just last month its team issued bonds totalling 1bn renminbi for IFC. Earlier this year it raised 1.2bn renminbi in a five-year deal for Volkswagen. And it also raised 1.5bn renminbi over two bonds for China Construction Bank. The Bank of China is the final bookrunner.