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As China-Canada relations recover, China will issue RMB green sovereign bonds in Canada for the first time to expand the offshore RMB market, attract North American investors, and strengthen bilateral economic, trade and financial ties.
China will do this for the first time in the background of continuous warming in relations between the two countries.Canada RMB sovereign issuancedeeply concerned . China’s Ministry of Finance announced on its official website that with the approval of the State Council, the Ministry of Finance will issue RMB green sovereign bonds in Canada during the week of November 9 this year, the scale of which will not exceed RMB 4 billion (about US$600 million). Specific issuance arrangements will be announced separately prior to issuance.
China’s Finance Ministry began issuing RMB in Hong Kong in 2009, Bloomberg reportedNational debt In 2016, it expanded its issuance into offshore markets outside Hong Kong for the first time, issuing 3 billion yuan of treasury bonds in London. Once this issuance is completed, Canada will become another overseas market to issue RMB sovereign bonds after Hong Kong, London and Macau, helping to expand the investor base of RMB assets in North America.
Zhao Zixuan, chief foreign exchange strategist for emerging markets at Bloomberg Intelligence, pointed out that since this year, China has significantly increased the promotion of offshore RMB, and the scope of its application has expanded from foreign exchange and interest rate markets to the commodity sector. Promoting offshore RMB bond issuance is also a logical step.
They believe this reflects China’s clear intention to promote the circulation of the RMB at home and abroad and reduce dependence on the US dollar. However, reduced dependence on the US dollar may have a greater impact on increased use of the euro. The issuance coincides with the resumption of economic and trade relations between China and Canada. The choice of Canada as the issuance location may reflect efforts by both sides to further deepen trade and financial ties.
Canada and China agreed this week to extend the initial joint economic and trade arrangement between the two countries until the end of 2028, including the extension of preferential market access measures for some Canadian agricultural and aquatic products.
Zhang Shuxian, strategist at Overseas-Chinese Banking Corporation in Singapore, noted that although the issuance location will not limit the scope of investors, issuing RMB bonds in Canada may help increase local investors’ awareness and attention to RMB products. These investors may not have previously actively participated in the offshore RMB market.
The RMB bonds issued this time are green bonds and will also add more RMB-denominated high-grade green asset options for foreign investors.
Summary FAQ
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China’s Ministry of Finance announced that with the approval of the State Council, it will issue RMB green sovereign bonds in Canada in the week of November 9 this year. This would be the first time China has issued such bonds in Canada.
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The issuance size does not exceed RMB 4 billion, approximately US$600 million, and is a green sovereign bond. The move could provide foreign investors with more high-grade green assets denominated in RMB.
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The analysis pointed out that Canada’s selection reflects the warming of China-Canada relations, and will also help boost RMB awareness and investor base in North America, and demonstrate China’s intention to reduce its dependence on the US dollar and promote offshore RMB exchange.
