Amid trade concerns, China issues US$8.2 billion in Hong Kong bills to stabilize the currency.
The People’s Bank of China (PBOC) said it would tender central bank bills totalling 60 billion yuan (US$8.2 billion) in Hong Kong on Friday, marking the second time this year it has used the policy tool to stabilise the yuan amid tariff tensions with the US.
The PBOC said it would tender 40 billion yuan in three-month bills and 20 billion yuan in one-year notes through the Central Moneymarkets Unit (CMU) of the Hong Kong Monetary Authority (HKMA) on a fixed-rate, interest-bearing basis.
The issuances aimed to “enrich Hong Kong’s high-credit-rating yuan financial products and improve Hong Kong’s yuan yield curve”, the PBOC said as it unveiled the move on Wednesday.
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China’s central bank has made a series of moves since January to support Hong Kong’s status as a global hub for the offshore yuan, including a 100 billion yuan trade financing facility for banks and a new programme for offshore yuan repurchase agreements (repos).
PBOC Governor Pan Gongsheng said last month that he would work with the HKMA, the city’s de facto central bank, to encourage “more high-quality enterprises to list and issue bonds in Hong Kong”, as well as issue yuan-denominated government bonds and central bank bills regularly.
“The issuance of yuan-denominated bills by PBOC, cleared through Hong Kong’s CMU, enables international investors to access [mainland China’s] government credit under market infrastructure governed by common law,” said Terry Yang, a partner at law firm Clifford Chance. The Chinese government was using the city’s unique features to enable continued international usage of the yuan, including the ability to use onshore Chinese bonds for collateral and repo-financing purposes, he added.
PBOC issued 60 billion yuan worth of bills in Hong Kong last month. That offering was the largest-ever single issuance of offshore yuan bills tendered by the PBOC in the city and marked the first time it had issued bills in January. It was oversubscribed by 2.16 times.
China was determined to prevent excessive depreciation pressure on the yuan, according to a senior Natixis economist. Photo: DPA alt=China was determined to prevent excessive depreciation pressure on the yuan, according to a senior Natixis economist. Photo: DPA>
The PBOC has issued central bank bills several times when the yuan faced greater depreciation pressure to signal the stability of the exchange rate. Last year, it issued 12 offshore central bank bills in Hong Kong totalling 275 billion yuan, according to central bank data.
