On January 4, the World Bank issued its first round of bonds denominated in China's currency, the yuan or renminbi, worth 500 million yuan ($76 million) with a two-year fixed rate due on January 14, 2013. The bonds offer investors a semi-annual coupon of 0.95 percent. The transaction comes at a time when China's shareholding in the World Bank is set to increase as part of the realignment of voting shares announced in April 2010. Mei Xinyu, an associate researcher at the Chinese Academy of International Trade and Economic Cooperation of the Ministry of Commerce, pointed out the significance of the World Bank's new move in an exclusive article to Beijing Review. Edited excerpts follow:
The World Bank's decision to issue 500 million yuan ($76 million) worth of yuan-denominated bonds in the Hong Kong capital markets comes as a pleasant surprise and is certainly the most significant financial event for China so far this year. It's a symbolic event in that the Chinese yuan, as a potential internationally accepted currency, has made an important step ahead in its internationalization efforts and that its potential influence in the international financial market is growing.
In 2008, the State Council decided to open pilot yuan settlement programs for commodity trade between the Yangtze River Delta region and Hong Kong and Macao special administrative regions, and trade between two Chinese regions—Guangxi Zhuang Autonomous Region and Yunnan Province—and the ASEAN. On April 8, 2009, the State Council decided to start a similar pilot program for cross-border trade in Shanghai and four cities of Guangdong Province—Guangzhou, Shenzhen, Zhuhai and Dongguan. Since then, the Chinese yuan has embarked on a cross-border settlement mission.
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