China to allow mainland financial institutions to directly issue yuan bonds in Taiwan

China Development Bank plans to issue yuan bonds in Taiwan by the end of the year, according to four people. 

PHOTO: BLOOMBERG

JUN 24, 20151:16 PM

[TAIPEI] Chinese regulators will allow mainland financial institutions to directly issue bonds in Taiwan, two people with direct knowledge of the matter told Reuters, in another step to towards deepening the pool of offshore yuan in Taiwan and reinforce financial relationships between Beijing and Taipei.

Under previous regulations, only foreign branches of mainland financial institutions were allowed to issue yuan-denominated bonds, which acted as a limit on the size of issuance. Now yuan bonds can be issued and backed directly by mainland banks, some of the world's largest financial institutions by market capitalisation.

China Development Bank plans to issue yuan bonds in Taiwan by the end of the year, according to four people.

Taipei Exchange Chairman Wu Soushan told Reuters in an interview that Taiwan's Chinese yuan bond market will likely reach 35 billion yuan (S$7.6 billion) in 2015, above the 30 billion yuan forecast earlier, on expectations of further easing of rules governing mainland firms issuing debt overseas.

Mainland bond markets are currently struggling to digest a massive 2 trillion yuan debt swap intended to ease the funding burdens borne by local governments, which has complicated attempts to reduce borrowing costs across the board.

An official at Taiwan's Financial Supervisory Commission said he was not aware of the move.

Officials at China's central bank and National Development and Reform Commission declined to immediately comment. Officials at CDB could not be reached for comment.

REUTERS