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HK, China Cooperate On Sovereign Bond Issues

by Mary Swire, LawAndTax-News.com, Hong Kong

24 November 2010


China’s Ministry of Finance (MoF) and the Hong Kong Monetary Authority (HKMA) have signed a memorandum of co-operation on using the Central Moneymarkets Unit (CMU) for the issuance of renminbi (RMB) sovereign bonds.

The memorandum of cooperation, signed in Hong Kong, sets the foundation for the tendering and issue of RMB sovereign bonds through the bond tendering platform offered by the CMU operated by the HKMA. It was said to show the deepening financial co-operation between the Mainland and Hong Kong, and will widen the channel and enhance the methodology for the issuance of those bonds.

Chief Executive of the HKMA, Norman Chan, said: "The CMU tendering platform has served us well in the past 17 years. It is where the primary issues of the Exchange Fund bills and notes and the government bonds are tendered. It helps increase market transparency and facilitates price discovery.”

“The signing of the memorandum by the MoF and the HKMA on using the CMU to conduct tendering for the issuance of RMB sovereign bonds,” he added, “marks a milestone of the strengthening of financial co-operation between the Mainland and Hong Kong."

The MoF subsequently announced that the central government will issue RMB sovereign bonds totalling RMB8bn (USD1.2bn) in Hong Kong in the near future.

A spokesman for Hong Kong’s government said that it "welcomes the issue of RMB sovereign bonds in Hong Kong, which clearly demonstrates the central government's support for Hong Kong to consolidate and strengthen the role as an international financial centre and further develop offshore RMB business."

The spokesman added that this will be the second time the central government has issued RMB sovereign bonds in Hong Kong since the first issue in September 2009, with larger scale and longer tenor, and that they will be issued to institutional investors using the tendering method on the HKMA’s CMU.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp
TAGS: investment | capital markets | China | offshore | agreements | stock exchanges | Hong Kong

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