Another First for China

Circle September 28th on your calendars. It will be a momentous day in financial markets history. That is the day that China will issue its first sovereign bonds denominated in its own currency - the renminbi - to offshore investors.

The amount of bonds to be sold will be small - only $879 million. But as the Chinese proverb says - "even the longest journey must start with a small step."

This first sale of renminbi bonds is another step taken by China to turn the renminbi into a global currency someday. Developing an offshore bond market will be an important step if the renminbi is to become a global cuurency, as bonds would provide foreign institutions with an attractive means by which to hold the renminbi.

Beijing has already taken a number of steps in the past year to encourage greater use of the renminbi in international transactions. The aim is, of course, to decrease China's dependence on the falling US Dollar.

For example - in the past year, China has signed deals with Malaysia, South Korea, Indonesia, Argentina and Belarus that allow it to receive renminbi instead of dollars for its exports to those countries. There are similar deals expected soon with other countries such as Brazil, etc.