Chinese central bank to issue bills in Hong Kong for the first time 

  • China's central bank said Wednesday it will issue a total of $2.87 billion of bills out of Hong Kong next month, its first issuance in the former British colony, the world's biggest offshore yuan clearing center.
 Staff deal with cash at a branch of Industrial and Commercial Bank of China Limited on March 14, 2011 in Huaibei, Anhui Province of China. 
VCG | Visual China Group | Getty Images
 Staff deal with cash at a branch of Industrial and Commercial Bank of China Limited on March 14, 2011 in Huaibei, Anhui Province of China. 

China's central bank said on Wednesday that it will issue a total of 20 billion yuan ($2.87 billion) of bills out of Hong Kong next month, its first issuance in the former British colony, the world's biggest offshore yuan clearing center.

The People's Bank of China (PBOC) said it will issue 10 billion yuan in three-month bills and 10 billion yuan in one-year bills in Hong Kong on Nov. 7.

Authorities say the issuance is aimed at expanding the range of yuan-denominated products of high credit rating in Hong Kong and improve the yuan yield curve. The issuance will also help the PBOC manage the yuan's liquidity in the offshore market and guide market expectations.

The onshore yuan ended domestic trading on Tuesday at 6.9613 per dollar, the weakest such close since May 20, 2008. The Chinese currency has lost more than 6.5 percent of its value to the dollar since the beginning of this year.

"While the volume is quite small — 10 billion yuan at the 3-month tenor and 10 billion yuan at the one-year tenor - this clearly signals that China's central bank is very keen to stabilize its currency especially at 7.00 hurdle," said Zhou Hao, senior emerging market economist at Commerzbank in Singapore.

By soaking up yuan funds in Hong Kong, the issuance of PBOC bills can help increase interest rates in the offshore yuan market and the cost of shorting the yuan.

The PBOC issued its first offshore bills ever in 2015, when it sold 5 billion yuan of one-year bills in London.