Benz might be issuing yuan-denominated bonds: report

German carmaker Mercedes-Benz might become the first foreign non-financial institution to issue yuan-denominated bonds on the Chinese mainland, Economic Information Daily reported Tuesday.

When reached by the Global Times Tuesday, the automaker declined to comment on the possible issuance.

According to the newspaper, the bond will be offered on China's interbank bond market, and the Bank of China (BOC) will be the lead underwriter of the bond, which Mercedez-Benz has started preparing for the issuance of since last year, Economic Information Daily cited unnamed sources as saying. The carmaker will issue the bond in the near future, said the report.

However, it remains unknown if the company would use the cash collected by the bond issuance in China or in other countries, the newspaper reported.

Mercedes Benz's possible issuance could widen the yuan's channel to the global market and facilitate the internationalization of the yuan, it noted.

China started allowing foreign entities to offer yuan-denominated bonds, also known as "panda bonds," in the mainland since 2005.

The issuers of the panda bonds have always been foreign financial institutions, such as the International Finance Corporation and the Asian Development Bank.

The cash, which the above financial institutions gathered by issuing the panda bonds, could only be used in the Chinese mainland and cannot be exchanged into other currencies for overseas investments.

However, the cash generated by Mercedes Benz's panda bonds could possibly be invested abroad as long as the company is obliged to follow China's rules for the management of foreign currencies, the newspaper cited an unnamed source as saying.