Shanghai Free Trade Zone to allow companies to raise yuan bonds

Shanghai is making a renewed effort to add lustre to the country’s first free-trade zone (FTZ), with plans to launch renminbi-denominated bonds in the “mini-Hong Kong”territory as a way to reinforce the yuan’s bid to become an international currency.

Speaking at the Lujiazui Forum on Monday, Zheng Yang, director of the Shanghai Financial Service Office, said that sales of municipal and green bonds would be conducted in the FTZ within this year, targeting global investors.

It will be the latest step Shanghai takes to liberalise the finance sectors in the FTZ after nearly three years of lacklustre operations in what was to be the testing ground for the country’s major economic reforms.

Zheng said that debt sales in the zone, which was established in September 2013, have secured support from the central government and the city would fine-tune relevant rules to facilitate the liberalisation.

A mature and established bond market with active participation from global investors is much needed to support the mainland’s move to internationalise the local currency. Mainland Chinese companies presently tap Hong Kong’s Dim Sum bond market to obtain offshore yuan funds.

The FTZ yuan bonds would be an initial step taken by the mainland to link the onshore and offshore bond markets.