The Chinese Ministry of Finance said Tuesday that it would issue 6 billion
yuan worth of government bonds in Hong Kong, a major step to
internationalize its currency at a time of concern about the dollar.

The yuan bond issue, worth about $879 million, will "promote the yuan in
neighboring countries," the Finance Ministry said on its Web site -
referring to the overall name of the Chinese currency, the renminbi - "and
improve the yuan's international status."

Experts estimate that China holds about 75 percent of its $2 trillion in
foreign reserves in dollar-denominated assets, but since the global
financial crisis, that position has made Beijing uneasy. Since the beginning
of 2007, the dollar has slipped more than 20 percent against the yen, and
more than 12 percent against the yuan, and investors are concerned as the
United States continues to pile up debt to finance its massive stimulus
package.

In March, China's prime minister, Wen Jiabao, expressed concern about the
dollar's slide and encouraged the United States to ensure its stability.

While the bond issue announced Tuesday is a step toward making the yuan a
global currency, the size of the sale is small compared with those of bonds
like Treasury securities, and the time it will take to establish the yuan
internationally remains uncertain.

"If I'm doing trade with China, where am I going to park this money?" Mr.
Zhi asked, referring to the yuan. The yuan-bond market needs security and
liquidity to make such settlements attractive, he said, and government bonds
will provide some security as well as a pricing benchmark.

http://www.nytimes.com/2009/09/09/bu...9yuan.html?hpw

Best Regards

Tom.