BEIJING -- China issued on Oct. 20 yuan-denominated government debt in London, venturing beyond the Hong Kong market for the first time as it seeks to globalize its currency.
It coincided with a high-profile visit to the U.K. by President Xi Jinping, suggesting London's potential role as a yuan trading center in Europe.
The choice of city for the bond sale appears meant to curry favor with the British for a Chinese bid to include the yuan in the basket of currencies underlying Special Drawing Rights, the International Monetary Fund's global reserve asset.
Under Xi, China has sought to expand the yuan's use in international trade and investment, capitalizing on damaged faith in the dollar after the global financial crisis. China resents the powerful influence of the world's leading reserve currency and U.S. monetary policy on its economy.
Though still subject to Chinese foreign exchange restrictions, the yuan is playing a bigger role in international finance than it used to. It overtook the yen in terms of share of payments for the first time in August, according to world financial telecommunications body Swift. With a 2.79% slice against the yen's 2.76%, the yuan trailed only the dollar, the euro and the pound sterling as the most-used currency.
But Beijing has its eye on a more significant milestone for the yuan: joining these other four currencies in the SDR basket, a matter that the IMF Executive Board will consider in November. SDRs have little significance other than as a medium of exchange among IMF member countries. But the Chinese leadership sees inclusion as proof of the yuan having made it as an international currency.
"Everybody is hoping the yuan becomes part of the SDR basket," a confident Zhou Xiaochuan, China's central bank governor, told a Chinese economic journal recently.
The British, meanwhile, want to cement London's status as a financial hub -- a strategy that is seeing the U.K. compete with Germany and other powers for influence in China. Last year, the U.K. became the first Western country to issue a yuan-denominated sovereign bond. George Osborne, the U.K.'s finance minister, talked up closer financial cooperation with China on a visit to the country in September.