China's treasury bond issue helps promote HK's offshore RMB center

HONG KONG, Aug. 17 (Xinhua) -- Chinese Ministry of Finance (MOF) announced on Wednesday its third and largest renminbi (RMB) denominated treasury bond issue in Hong Kong.

The amount totaling 20 billion yuan exceeded the aggregate of bond issuance in the past including 6 billion yuan and 8 billion yuan in 2009 and 2010 respectively.

Analysts expected the move to both diversify RMB investment options and boost the RMB bond market. In the long run, with Hong Kong's status of an offshore RMB center confirmed by the central government, it is of highly supportive significance.

MORE USE OF RMB

Although a growing number of yuan denominated investment tools were introduced since Hong Kong launched RMB business in 2004, market participants have been calling for more diversified options.

The biggest characteristic of treasury bond investment is stable income, higher safety factor, which is adored by the market, said Zhang Ying, senior economist with Bank of China (Hong Kong) Limited.

RMB deposits advanced at stunning speed in Hong Kong due to expectations of further appreciation of yuan and the boom in cross border trade settled in the currency.

According to Hong Kong Monetary Authority, the city's RMB deposit grew by 76 percent from 315 billion yuan at the beginning of the year to 550 billion yuan by the end of June, increasing at a monthly average of around 40 billion yuan.

The treasury bonds issue will increase investment tools for local investors, especially for banks who have large RMB funds, Zhang said.