B.C. to sell bonds in China

Province seeks to raise money in ‘Dim Sum market’

B.C. is set to become the first foreign government to sell bonds directly into the Chinese market, provincial Finance Minister Mike de Jong said on Wednesday.

De Jong, who is visiting Beijing this week, said China’s domestic bond market regulator MAFMII approved B.C.’s bid to allow the province to issue Chinese currency bonds to attract capital in the socalled “Panda bond” market.

B.C. was also the first foreign government jurisdiction to issue “Dim Sum bonds”, or renminbi bonds outside of China (the offshore market), in 2013. The first two B.C. renminbi-bond issuances raised almost $1 billion.

“The fact we were the first to enter the ‘Dim Sum market’ sent a very powerful signal to China about the importance we attach to our relationship with them,” said de Jong in a call from Beijing. “It’s inferred that we are comfortable and enthusiastic about their efforts to internationalize their currency.”

De Jong said B.C. plans on issuing the first ‘Panda bond’ early next year.

“It’s probably the second-largest bond market in the world,” de Jong said of the domestic Chinese bond market. “Even for a AAA-rated jurisdiction like us, which doesn’t have problems accessing capital, our objective has been to diversify.”

B.C. has similar investment instruments in the U.S. dollar, the euro and the Australian dollar, de Jong said.

Beijing has made the liberalization and globalization of its currency a priority in its financial market reforms, and has pushed to have the renminbi recognized as an official reserve currency by the International Monetary Fund. Canada became the first North American renminbi trading hub earlier this year.

There were concerns earlier this year about the renminbi’s value fluctuations. In August, China’s central bank devalued the currency by 1.9 per cent. De Jong, however, said that B.C. has addressed how it structured its agreement with China’s bond regulators.