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People's Daily Online>>China Business

Baosteel issues bonds in HK to fund overseas units

By Fang Yunyu (Global Times)

08:41, November 28, 2011

Baoshan Iron & Steel Co (Baosteel), the country's largest steelmaker by crude steel output, announced over the weekend that it has successfully issued 3.6 billion yuan $564.87 million) worth of bonds in Hong Kong, which signals the government's determination to turn the yuan into a global currency. 

The issuance, the biggest yuan-denominated bonds by a Chinese company in Hong Kong, is aimed at injecting cash into overseas units of Baosteel, according to the company's announcement.

"The deal is part of an experiment to promote the yuan among overseas investors by using Hong Kong as a platform," Zheng Dong, a steel industry analyst at Guosen Securities Co, told the Global Times yesterday.

The move also shows the Shanghai-based company needs funds for its overseas iron and steel projects, Zheng noted.

Earlier in August, Zhou Xiaochuan, the country's central bank governor, said at a forum that the central government supports Hong Kong to become a center for offshore yuan business, and mainland companies will raise up to 50 billion yuan from bond sales this year in Hong Kong.

According to statistics released by the Hong Kong Monetary Authority on October 31, the region's yuan deposits grew by 2.2 percent to 622.2 billion yuan in September, compared to a month earlier.

However, due to Hong Kong's low deposit interest rate and the expectations of the yuan appreciation, yuan-denominated bonds have become popular among investors.

Previously, only the country's banks and Chinese companies' overseas arms were allowed to issue such bonds in Hong Kong. Baosteel was the first Chinese company to obtain permission of the State Council last month to raise money in such a way.

"Baosteel is devising a major strategy for the overseas market," Ma Zhongpu, chief analyst at steel research firm Umetal, told the Global Times yesterday,

Some analysts believe Baosteel may use the funds to acquire overseas resources or companies under control of foreign governments.


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