6 August 2012
Standard Bank Group places first offshore renminbi bonds with eastern and western
African central banks
Standard Bank Group acted as sole bookrunner for the latest placement of China Development
Bank's RMB500-million worth of three-year offshore renminbi bonds to African central
banks. This is the first time that African central banks have participated in an
offshore renminbi bond investment in primary markets.China Development Bank is a
major state-owned policy bank in China.
This landmark bond sale to Africa was a tranche of China Development Bank's recent
RMB2.5-billion bond offering, in which Standard Bank Group was one of the seven
joint bookrunners and lead managers. China Development Bank issued three-year and
20-year offshore renminbi-denominated bonds in Hong Kong (the so-called dim sum
bond), with participation from Asian and non-Asian investors.
About 60% of the total dim sum bonds were allocated to European, Middle East and
African investors, and Standard Bank Group's allocation, which was placed with African
investors, accounted for one fifth of the total bonds China Development Bank issued,
and was thehighest amongst all the bookrunners and lead managers.
Mr Bing Fan, Managing Director of Standard Bank China, says: "In this bond issuance,
Standard Bank placed the first dim sum bonds with eastern and western African central
banks. The allocation to African central banks is a reflection of the latest trend
in the currency reserve strategies of some African nations, which have started to
include the renminbi into their foreign exchange reserve portfolios. It bolsters
two-way capital flows between China and Africa, which is exciting for both sides
as until recently capital has mostly been flowing from China to Africa.
"The bond sale also marks an important step in the renminbi's road to becoming a
global reserve currency, which is key to the internationalisation of the currency."
Jeremy Stevens, a Standard Bank Group economist based in Beijing, says: "The internationalisation
of the renminbi is inevitable, and Africa is a fertile soil and important front
for this process, with RMB36-billion in trade done in the Chinese currency already
during 2011. Africa should use Beijing's desire to broaden the geographical reach
and use of the renminbi to reinforce its relevance.
"The internationalisation of the Chinese currency will lower transaction costs,
enable better working capital and improve risk management practices, which along
with various incentives, will support trade flows. Investment will find support
through cheaper sources of funding, which is raised in Hong Kong orthrough loans,
and better-protected capital with hedging instruments. This will result in more
favourable terms for African projects," says Mr Stevens.
Mr Fan highlights Standard Bank Group's commitment to promoting renminbi internationalisation
by expanding and encouraging the use of the currency in trade settlement between
China and Africa.
"The issuance of CDB's dim sum bonds comes at a time when African central banks
need to diversify their currency reserves in the context of the Eurozone crisis.
Standard Bank identified and capitalised on this opportunity and facilitated the
deal, which was done within a month.
"We believe that African central banks will become increasingly interested and involved
in the offshore renminbi market as the continent's national and personal wealth
grow in tandem with its economic and political development."