Yuan overtakes euro as main commercial-financing currency
Date
11/20/2023 6:21:00 AM
(MENAFN) On Friday, a UK-based news agency reported that global corporations are achieving unprecedented profits by issuing bonds denominated in yuan and securing substantial loans from Chinese lenders at favorable interest rates.
This comes at a juncture when the expenses associated with utilizing Western banks are sharply escalating. The news agency notes that both international companies and banks are successfully raising substantial funds through Chinese 'panda' and 'dim sum' bonds, both denominated in yuan.
“While the fundamental story is not compelling for Chinese investors looking for growth, the depreciation of the yuan as well as the rate cuts result in a much cheaper cost of borrowing,” stated Fiona Lim, top FX strategist at Maybank.
The uptick in China’s borrowing market has made the yuan the world’s second-biggest trade funding currency, ahead of the euro. The development reflects Beijing’s ambitions to boost the yuan’s share in global funding, the news agency also mentioned.
As per the report, in October, the National Bank of Canada garnered 1 billion yuan (equivalent to USD 138.6 million) by issuing a three-year panda bond with a 3.2 percent coupon rate, notably lower than the prevailing domestic interest rates of 4.5 percent.
The People's Bank of China (PBOC) has actively promoted lending to international companies by banks and has expanded the utilization of the yuan beyond the country's borders, according to the news outlet.
“Panda bonds are steadily promoting the renminbi’s function as a funding currency,” the PBOC mentioned in a statement issued in October.
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