BEIJING: Indonesia's central bank has started investing in China's interbank bond market, but neither country will say how much, underlining Beijing's desire to promote yuan internationalisation without giving too much detail.
In 2010, China began allowing foreign central banks to directly invest in its domestic interbank bond market without going through the Qualified Foreign Institutional Investor (QFII) programme.
The new policy was intended to widen investment channels for foreign central banks and promote the international use of the Chinese currency in foreign reserves.
China has currency swap agreements with around 19 countries, according to Reuters data, and any of them in theory can apply to use their yuan reserves to invest in Chinese bonds.
However, most of the participating countries do not oblige their central banks to announce their investments. Public announcements to date have relied on positive diplomatic language but been short on hard data.
On Monday the PBOC ran a brief article on its website saying the Indonesian central bank has begun buying bonds on China's interbank market. Bank Indonesia made a similarly brief statement.
Chinese leaders must weigh the benefits of positive publicity for the yuan internationalization programme against the risk that more detailed information on foreign moves in and out of Chinese bonds would become another proxy index of foreign confidence in China's future.
Many central banks also don't disclose detailed information about the composition of their foreign reserves.
The Bank of Korea announced that it had been approved to purchase 20 billion yuan ($3.14 billion) worth of Chinese bonds in April but did not provide additional details. On July 1, the official Xinhua news agency reported that Korea had begun making purchases without saying how much.
Japanese Finance Minister Jun Azumi said Japan will be allowed to buy 65 billion yuan worth of Chinese bonds in March, but also refrained from elaborating.
Other major trading partners have also moved to sign currency swap agreements, most recently Brazil, which has been an outspoken critic of the dollar's dominance as a reserve currency.
Australia, a major supplier of raw materials to China, signed a swap agreement in March and has begun lobbying for direct conversion between yuan and the Australian dollar.
Besides central banks, China allows yuan clearing banks in Hong Kong and Macau and foreign banks that help settle cross-border trade in yuan to trade in its interbank bond market.
The central bank does not publish official data on foreign holdings of Chinese debt but China's main bond clearinghouse does publish a data series widely considered to be a proxy for foreign holdings of Chinese interbank bonds, which stood at 96 billion yuan at the end of June, up from 87 billion yuan at the end of 2011, out of a total of 22 trillion yuan.
Comments
Comments are closed for this article.