The evidence that the RMB is going to become central to global trade as a global reserve currency and as a global payment currency keeps on coming. The UK’s  overseas sovereign issuance of offshore renminbi bonds, and the dramatic increase in the use of RMB for payments to China and Hong Kong.

Issuance of offshore RMB bonds

The UK on October 14 became the first overseas sovereign to issue offshore renminbi bonds, pricing a three billion renminbi offering that represented a key milestone in the development of this market which illustrates its potential as a global hub for the Chinese currency.

The Reg S three-year deal was priced at par with a coupon of 2.70%, or at the tight end of the final price guidance of 2.75% (+/- 5bp) and 20bp inside the initial guidance of 2.90% area. While the UK government carries a rating of Aa1 from Moody’s, AAA from Standard & Poor’s and AA+ from Fitch, the issue is not rated.

The transaction, issued through The Lords Commissioners of Her Majesty’s Treasury on behalf of the UK government, garnered a total order book of over 5.8 billion renminbi from 85 orders with 57% of the bonds sold in Asia, 36% in Europe, the Middle East and Africa, and 7% in the Americas. By type of investors, banks accounted for 64%, fund managers 19% and central banks/official institutions 17%.

Increased use of RMB for payments to China and Hong Kong 

The latest SWIFT RMB Tracker report shows that 50 countries out of the 161 that exchanged payments with China and Hong Kong in October 2014 now pay more than 10% with RMB. 

Overall, the RMB kept its position as the seventh-ranked payments currency in the world, despite a decreased market share from 1.72% to 1.59%. In October 2014, the value of RMB global payments value decreased by -7.2%, which is below the average growth of 0.4% for all currencies.

But will wasted investment halt RMB progress?

The Financial Times reports, “In 2009 and 2013 alone, “ineffective investment” came to nearly half the total invested in the Chinese economy in those years, according to research by Xu Ce of the National Development and Reform Commission, the state planning agency, and Wang Yuan from the Academy of Macroeconomic Research, a former arm of the NDRC.” Could this wasted $6.8trn stop the growth of the Chinese economy and the RMB?