The development of SDR market is of great strategic significance to the rise of the Chinese yuan. [Photo/IC]

Since the Chinese yuan's inclusion in the International Monetary Fund's (IMF) elite basket of reserve currencies that determine the unit value of Special Drawing Rights (SDR), the government has vowed to promote SDRs in the Chinese economy.

As a result, the China Development Bank (CDB) is about to issue 200 to 500 million SDR-denominated bonds in the China (Shanghai) Pilot Free Trade Zone (FTZ), Pudong Times reported on Aug 8.

The Shanghai headquarters of CDB was inaugurated this June, with Hu Huaibang, chairman of the bank, saying that the bank would be committed to supporting the infrastructure construction of the bond market of Shanghai FTZ and promoting the internationalization of RMB.

On November 30, 2015, the IMF decided that the Chinese yuan would be added to the SDR basket, coming into effect in October 2016.

SDR bonds, not only provides overseas investors with satisfactory yields, but meets the domestic demands for diversified asset allocations.

Liang Hong, a chief economist from China International Capital Corporation Limited (CICC), said that SDR bonds will offer an opportunity for domestic investors to allocate foreign exchange assets without going abroad, and developing the SDR market will be of great strategic significance to the rise of the Chinese yuan.

The Shanghai municipal government has recently reiterated its resolve to increase the global influence of RMB, establish an international financial market, develop new channels for overseas investors to enter the domestic market and enhance the capital asset pricing ability of Shanghai financial market. The actions look set to strengthen financial reform in the city's FTZ and enable it to become an international financial center.