It's official! Chinese internationalization of the Yuan is now underway

On June 8, the London Stock Exchange issued the first Chinese offshore sovereign bond, setting the table for the internationalization of the Renminbi currency.  This move had been months in the making when the City of London had signed an agreement to participate in Yuan denominated Chinese bonds being sold in their global markets.

This move also is another step in China's ultimate plan to have the Yuan currency be on par or greater than the dollar as a medium of trade, especially following last year's acceptance into the IMF's SDR basket of reserve currencies.

China’s Ministry of Finance listed its first sovereign offshore renminbi bond on the London Stock Exchange on Wednesday, marking a significant milestone in increasing London’s offshore renminbi liquidity as the renminbi embraces its new status as a global reserve currency.

The 3 billion yuan ($458 million) three year renminbi bond issued in London is the first sovereign bond Ministry of Finance issued outside China. It is expected to act as a benchmark to aid future renminbi assets’ pricing, hence encourage more issuance of renminbi investment products offshore. Bank of China and HSBC are joint global coordinators of the bond.


For any currency to reach the stage of internationalization, bond hubs must be established where foreign countries and investors can have access to buying these bonds, and allowing for an expansion of the originator's currency within the global monetary system.

Yet China's partnership with the London Stock Exchange is not the only new activity for Yuan internationalization this week.  In fact, on the same day of their new bond issuance in London, the country's Renminbi Qualified Foreign Institutional Investor (RQFII) campaign opened up in the United States with a licence to allow U.S. investors to buy renminbi-denominated A shares in companies on Chinese exchanges.

China will grant the US a 250-billion-yuan ($38 billion) quota under its Renminbi Qualified Foreign Institutional Investor (RQFII) program, Central Bank Vice Governor Yi Gang said on Tuesday.

The announcement was made during the 8th round of the Strategic and Economic Dialogue talks in Beijing.

Launched in 2011, the RQFII is one of the first efforts by the Chinese government to internationalize the renminbi, allowing foreign investors to invest in the country’s capital market.
Once licensed, foreign financial institutions are permitted to buy renminbi-denominated “A shares” in mainland China.

The quota is the first granted to the US under the program. Hong Kong has the largest RQFII quota of 270 billion yuan ($41 billion).

The fact that the US was granted qualified investor status is a sign of the unprecedented level of economic cooperation between Beijing and Washington.

— Sputnik News

As the world pursues an agenda of de-dollarization, and use the Euro, Pound, and Yen stagnate or slowly decline, the star rushing in to fill the gap is acting quickly to internationalize their currency in trade, equities, bonds, and credit markets.  And over the next years, or perhaps as quickly as just a few months, the world will have a choice in which medium of currency to conduct trade in, and it is becoming more likely that their primary currency of choice will be the Yuan.