PBoC putting dim sum on the menu in London

China's central bank unveils landmark deal as it plans to tap the offshore bond market for the first time in its 67-year history.

China's central bank, The People's Bank of China (PBoC), is set to launch a maiden international bond offering on Tuesday that is highly symbolic on a number of levels.

Firstly, it will be denominated in renminbi highlighting China's determination to underscore the currency's growing importance on the world stage.

Secondly, the deal is being launched from London where it has been timed to coincide with Chinese President Xi Jinping's state visit to the UK this week, one decade after the last official visit by a Chinese leader.

The deal is likely to be large and short-dated, according to two syndicate bankers familiar with the transaction. They added that details are still being discussed although it has been previously reported that the deal will total about Rmb5 billion ($780 million) and have a one-year tenor. 

"Bonds issued by the PBoC in London will certainly set the benchmark for future borrowers in London, cementing the city's role as a preferred destination for offshore renminbi business," said one banker familiar with the process. "It will be launched as a senior unsecured transaction, sharing the same credit rating with the MoF [Ministry of Finance]." 

PBoC's offering follows a steady trickle of deals by the country's state-owned banks since China Construction Bank (CCB) first tapped the market in 2012, raising Rmb1 billion. Like its successors, the bank issued out to three-years and secured a coupon of 3.2%.

The following year, Industrial and Commercial Bank of China (ICBC) raised Rmb2 billion from a split three- and five-year deal that carried coupons of 3.35 and 3.75% respectively.

Then in early 2014, Bank of China raised Rmb2.5 billion from a three-year deal with a coupon of 3.45%. Finally in September last year, the closest sovereign proxy, China Development Bank (CDB), raised Rmb2 billion.

Joint global co-ordinators for the PBoC's offering are ICBC and HSBC, with Agricultural Bank of China, BOCI, Bank of Communications, CCB, and Standard Chartered as joint bookrunners, according to a termsheet seen by FinanceAsia.

Last week CCB ended a relatively lengthy hiatus in the dim sum market by raising Rmb1 billion in London through the sale of a two-year note that carried a 4.3% coupon. The deal has been viewed as a warm up ahead of Xi's visit this week.

During Xi's four-day visit, the UK and China are set to announce a series of investments and deals worth billions of dollars, including nuclear energy projects and railway investments, according to Xinhua News, citing China's Ministry of Commerce.

Bilateral trade between the two countries rose 15.3% to $80.9 billion last year, the fastest rate of growth among all European countries.

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