(Yicai Global) July 20 -- China’s Ministry of Finance is doubling the size of its second bond issuance this year in the Hong Kong Special Administrative Region, which is due to be released next month, to CNY12 billion (USD1.7 billion).

The second out of four tranches of government debt scheduled for 2023 are set to be sold on Aug. 2 and the amount has been increased by CNY6 billion (USD835.8 million), according to a notice posted on the ministry’s website yesterday.

The first batch, released on July 14, was also CNY12 billion, setting a record for the most sold in a single issue. Two more batches of CNY6 billion each are scheduled for the rest of the year, the ministry said last month.

The increased sovereign bond issue in Hong Kong signals that, from the perspective of supply and demand on the forex market, the ministry is tightening liquidity of the offshore yuan, Guan Tao, global chief economist at the Bank of China’s global investment unit BOC International, told Yicai Global.

This will help boost yuan assets on the offshore market and enhance the influence of redback bonds, Guan said. It will help stabilize market expectations, steady the foundation of the macro economy and keep the yuan exchange rate at a reasonable and balanced level.

The People’s Bank of China’s release of central bank notes has a similar effect and the PBOC will probably also hike the sale of central bank notes in Hong Kong to adjust the liquidity of offshore yuan, he added.

The ministry has issued yuan government bonds in Hong Kong for 15 years in a row, helping to boost the local supply of high-grade yuan assets, supporting the SAR's efforts to build itself into an offshore financial center and promoting the internationalization of the redback.

Editors: Shi Yi, Kim Taylor