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NDRC approves new dim-sum bonds

By Wang Feier (Global Times)

08:14, April 26, 2012

The National Development and Reform Commission (NDRC), China's top economic planning agency, has given its approval to four State-owned firms - three power companies and a miner - to issue 18.5 billion yuan ($2.93 billion) in yuan-denominated bonds in the Hong Kong bond market, the NDRC announced on Tuesday afternoon.

To date, only one State-owned Chinese non-financial firm, Baosteel Group, has been given government approval to issue offshore yuan bonds, also known as dim-sum bonds.

This expansion of the dim-sum bond market will provide more investment vehicles for yuan holders overseas and give mainland companies access to low-cost financing, experts told the Global Times.

Since the dim-sum bond market started in 2007 as Beijing mulled easing restrictions on the yuan's use overseas in order to promote the yuan as reserve currency, offshore investors have been increasing their holdings of the currency on expectations of its rise against the dollar, Shi Lei, a bond analyst from Ping An Securities, told the Global Times.

Yuan deposits in Hong Kong stood at 588.5 billion yuan as of the end of 2011, up 87 percent year-on-year, according to data from the Hong Kong Monetary Authority (HKMA), Hong Kong's central banking institution. However. the value of dim-sum bonds issued over this period totaled only about 104 billion yuan according to the HKMA.

With few yuan-denominated financial products available, most offshore yuan holders rely on low interest rate bank deposits or wealth management services, Zhou Hao, a global markets analyst from ANZ China, told the Global Times.

"Expanding dim-sum bond issuance will offer more investment options to yuan holders abroad," said Zhou.

The low savings rate in Hong Kong, will also allow domestic firms to sell their offshore bonds with a lower interest rate than on the mainland, Zhou added.

The one-year savings rate, a benchmark for bond interest rates, generally floats around 2 percent in Hong Kong, lower than the mainland market's 3.5 percent, according to the central banks in both territories.

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