ICBC issues dim sum bonds

The lender is the second Chinese bank to issue yuan-denominated notes in London. The city wants to become an offshore hub for yuan trading.[Photo/China Daily]

Chinese bank sells 2b yuan in notes in London amid internationalization

Industrial and Commercial Bank of China Ltd has sold 2 billion yuan ($328.5 million) in dim sum bonds, which are yuan-denominated bonds, in London.

The offering was oversubscribed by four times and eventually priced at the lowest end of the range.

The issue came on the same day as Chris Salmon, chief cashier of the Bank of England, was quoted by Bloomberg News as saying that the United Kingdom's central bank is ready to help establish a clearing bank for yuan transactions in London.

The two developments highlights London's goal of becoming an offshore hub for trading the Chinese currency, as financial centers around the world scramble to cash in on the yuan's global rise.

ICBC, which is China's largest lender by assets, is the second Chinese bank to issue yuan bonds in London. China Construction Bank Corp offered 1 billion yuan last year.

ICBC's offering consisted of two tranches. One is for 1.3 billion yuan, with a three-year maturity and a 3.35 percent coupon; the other, at 700 million yuan, has a five-year maturity and a 3.75 percent coupon, the bank said in a statement on Wednesday.

The proceeds will mainly be used to boost offshore yuan-denominated loans. The underwriters include Royal Bank of Scotland Plc, Standard Chartered Plc and JPMorgan Chase & Co, the Financial Times reported.

"Investors are in high spirits about our offering," said ICBC in the statement.

Salmon told Bloomberg in an interview on Tuesday that while the UK doesn't "absolutely" need a specific institution for yuan transactions, there is a "will in the market for a London clearing bank to be established.

"We'll be prepared to facilitate that", he told Bloomberg.

In June, the Bank of England became the first among European central banks to draw up a currency swap line with China. The line supports yuan users in the UK by providing liquidity whenever needed.

Last month, during UK Chancellor of the Exchequer George Osborne's visit to China, it was announced that China and the UK will introduce direct trading between the yuan and the pound.

Beijing also granted an 80 billion yuan quota for financial institutions in London to invest in China's domestic securities under the renminbi qualified foreign institutional investor program.

British Prime Minister David Cameron is scheduled to visit China next month, part of what he has termed an effort to help British companies tap into China's "vast and varied" markets.

"Clearly, nobody wants to be left behind in the yuan's internationalization, including London. Opportunities to be brought about by the yuan's global push are tremendous," said Zhang Qi, an analyst with Haitong Securities Co Ltd.

The UK first showed interest in offshore yuan trading in 2011. During 2012, the value of yuan-denominated letters of credit grew 13 times, as companies showed strong will in transacting their business in the Chinese currency. Also in 2012, the value of yuan-financed cross-border trade in London doubled to 33.6 billion yuan.

A report published last month by the Society for Worldwide Interbank Financial Telecommunication showed that the yuan has overtaken the Swedish krona, the South Korean won and the Russian rouble as the world's eighth most actively traded currency.