Expert:World Bank Issue Yuan Bond Sale to Increase China's Stake in Institutions

The World Bank has announced its first yuan-denominated bond sale as it hopes to diversify investors' currency holdings and increase the exposure of the yuan. As our reporter He Fei finds out, analysts say this will increase China's stake in global institutions.

The 500 million yuan, or about US$75 million US dollars, two-year fixed-rate bond, offers investors a semi-annual coupon of 0.95 percent.

It is the first yuan bond issuance this year in Hong Kong. It is also the World Bank's first yuan bond ever.

Professor Ding Zhijie from the University of International Business and Economics says the move signals the bank's strong interest in supporting the development of the yuan market.

"It indicates the World Bank's recognition of yuan's prospect. The move is based on yuan's stability, particularly from its performance among the world currencies. Yuan has been a strong currency and its influence is rising, which spurs up the need for Chinese currency from other parts of the world."

China has been trying to expand the clout of the yuan around the world where the US dollar still dominates as the preferred currency.

Professor Ding says the bond this time will help with yuan's influence as it goes internationalized.

"One of the core businesses of the World Bank is to provide loans to developing countries. The money raised at this time will be used in assisting developing counties and it helps enhance the influence of Chinese currency in these countries."

The issue of yuan bond comes as China's shareholding in the World Bank is set to increase as part of the realignment of voting shares announced last April. If the realignment is formally approved as proposed, China will become the third largest shareholder in the World Bank after the United States and Japan.

Professor Xiao Geng, director of Columbia Global Center of East Asia at Columbia University, says the move of World Bank will set an example and more private organizations will follow suit.

"I think right now the RMB bonds are quite small, but this is a very good start. Because the international organization issuing RMB bond will send a signal to other organizations including private organizations, trying to issue RMB denominated bonds, this is definitely in a right direction, more and more institutions in the future will start to issue RMB denominated products, and that will be very useful for China's internationalization of its currency."

Currently, global companies and institutions such as the Asian Development Bank, McDonald's and Caterpillar have all issued yuan bonds.

The HSBC Group will be the major underwriter of the bond issue, which will settle on January 14th.

For CRI, I'm He Fei.