China Construction Bank plans to raise 80 billion yuan ($12.5 billion) through a yuan-denominated bond sale in Hong Kong, which analysts said Tuesday offered cheaper borrowing costs and strong demand.
China Construction Bank chairman Guo Shuqing said the lender hoped to raise most of the debt in the former British colony by the end of this year, Dow Jones Newswires reported Monday.
Standard & Poor's analyst Liao Qiang said the borrowing costs for yuan-denominated debt were "substantially lower" in Hong Kong than on the mainland and there was flourishing demand for such products.
"There are few investment options for yuan funds in Hong Kong while people are converting their money into yuan on the expectation for the currency to appreciate," Liao told AFP.
"As supplies of yuan funds exceed demand, yields of relevant financial products are weighed down."
Issuance of offshore yuan bonds, or "dim sum" bonds, has reached 70 billion yuan so far this year, already double the total issuance for 2010, Dow Jones quoted Peter Pang, deputy chief of Hong Kong Monetary Authority, the city's de facto central bank, as saying.
New issuance is likely to exceed 100 billion yuan by the end of 2011, Pang said.
In 2009, China approved using the yuan to settle cross-border trade with Hong Kong and last year it relaxed rules to allow non-financial foreign firms to issue yuan-denominated bonds.
A spokesman for China Construction Bank was not immediately available for comment when contacted by AFP on Tuesday.
The lender recorded a first-half net profit of 92.8 billion yuan, up 31 percent from a year earlier on strong growth in fee-based businesses such as financial consulting and advisory services.