We wrote in June 2015 in a post titled ‘Investing in China’:
‘China is on the move. it has currency swap agreements with a lot of major trading partners. It has opened up its internal markets to the outside world and together with a stable currency, its bond market is maturing, its exchanges are maturing, its investment banks are expanding globally (silk road, deals all over South America, Eurasia, Asia), etc….. and it is a huge hoarder of gold, etc. Plus they meet in October with the IMF to be considered as part of the Special Drawing Rights (SDRs). A seminal moment…’
Well, another seminal moment has arrived as the World Bank is about to launch the first-ever bond in China which is denominated in the IMF’s Special Drawing Rights (SDR) and can be repaid in Renminbi. The float is part of Chinese efforts to make the Renminbi a global player in international transactions and investments. This recent announcement will significantly help boost the development of the Chinese bond market while halting capital outflows.
Commercial investors are unlikely to show much interest initially due to the low yield on offer (0.3-0.6%) but it is a significant and symbolic victory for China as it slowly attempts to disrupt the global reliance of the U.S. Dollar for global transactions and foreign currency reserves.