Banks to sell debt in Taiwan

A branch of the Bank of Communications Ltd in Qiqihar, Heilongjiang province. Starting on Nov 27, 2013, State-owned and commercial banks and their overseas branches will be able to issue renminbi-denominated bonds in Taiwan after gaining the approval of the Taiwan OTC Exchange. Wang Yunlong / for China Daily

Bank of Communications Ltd and Agricultural Bank of China Ltd both have applied to issue renminbi-denominated bonds in Taiwan, financial authorities for the island said on Wednesday.

BOCOM and ABC could become the first banks from the Chinese mainland to issue renminbi-denominated bonds and the equivalent of Hong Kong's Dim Sum bonds - in Taiwan, as early as this week.

BOCOM has applied to sell 1.2 billion yuan ($197 million) of the renminbi-denominated bonds through its branch in Hong Kong, The Wall Street Journal reported.

Its bonds are of two types: three-year bonds with a coupon interest rate of 3.4 percent and five-year bonds with a coupon interest rate of 3.7 percent.

ABC plans to issue 1 billion yuan in bonds through the Medium Term Note system by its branch in Hong Kong, the bank said in an e-mailed statement to China Daily on Wednesday.

"The issuance will draw a large number of investors as the renminbi appreciates and enjoys a higher international profile," ABC said.

"It will diversify the renminbi-dominated financial products in Taiwan and will bring more opportunities for renminbi-denominated investments," the bank added.

Starting on Wednesday, State-owned and commercial banks and their overseas branches will be able to issue renminbi-denominated bonds in Taiwan after gaining the approval of the Taiwan OTC Exchange, also known as Gre Tai Securities Market, a major market for the issuance and exchange of financial products in the region, the financial supervisory commission in Taiwan was quoted as saying by local media.

Twenty banks from the Chinese mainland are qualified for the issuance. Four major mainland banks have made inquiries about being qualified to issue bonds on the island.

The commission estimates that bonds from the mainland will total 8 billion yuan.

"Taiwan, with its proximity to the Chinese mainland, enjoys a great advantage as an offshore center for renminbi," said Lian Ping, chief economist with Bank of Communications.

"The bonds issued by banks from the mainland will offer more choices in financial products for enterprises and residents holding renminbi," he said. "As the communication across the Taiwan Straits grows more frequent, the renminbi-denominated business will increase as well."

Since February, when business first opened for the currency, six local and overseas financial institutions have issued renminbi-denominated bonds in Taiwan. None is from the mainland.

The coupon interest rates of the current renminbi-denominated bonds are all below 3 percent.

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