A Yuan-Denominated Bond Issue Is Highly Unlikely This Year, Says Russian Finance Ministry
Yicai Global
/SOURCE : Yicai
A Yuan-Denominated Bond Issue Is Highly Unlikely This Year, Says Russian Finance Ministry

(Yicai Global) Feb. 9 -- Russia's finance ministry is studying the possibility of issuing yuan-denominated federal government bonds for Chinese investors in Moscow, but the probability that such bonds will issue this year is very low.

"It's highly unlikely," said K. V. Vishkovsky, head of the National Debt and Financial Assets Department of Russia's Ministry of Finance, news agency Sputnik reported.

The ministry planned to offer the bonds last year, with the total issue projected at USD1 billion. The plan has not been implemented, but the Russian government has not given it up. Restrictions China imposes on capital exports scotched the plan, Vishkovsky explained.

The 'Main Orientations of Russian Treasury Bond Policies 2017-2019' the ministry drafted indicate that whether yuan-denominated treasury bonds can be issued in Russia depends on actions taken by China's central bank.

Geopolitical factors leave Russia and its companies unable to obtain funding from foreign sources, and so seeking alternative funding for the country and its economic entities is imperative for the government. The most promising way of doing so is by issuing yuan-denominated federal bonds on the Moscow Stock Exchange, directed at investors in China, rather than offshore companies.

The reasons for the decision to use yuan as the currency for the bond issue are the massive size of the Chinese bond market, the potential of yuan as a new reserve currency and the importance of bilateral economic cooperation between China and Russia, the finance ministry noted.

At present, as China still has restrictions on convertibility of the yuan and other foreign exchange activities, expediting the process is impossible, let alone forcing it, Sputnik earlier said. A consensus must be reached with China's central bank and organizational prerequisites established before Russia can enter the Chinese market. The two sides will set out the prerequisites for the cooperation step by step.

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