HSBC, Europe's biggest bank by market value, has become the first bank to issue a yuan-denominated bond outside a sovereign Chinese territory. Hoping to raise at least 2 billion yuan through the three-year 'dim sum bond', HSBC said the benchmark move will hasten the yuan's internationalisation.

Calling the 'internationalisation of the yuan simply too important to ignore', the bank said the bond issuance was part of a broader strategy to boost London's position as a major international renminbi hub.

In a press statement published on its website, HSBC said:

The three year RMB-denominated bond, issued by HSBC Bank plc, is the first of its kind to be launched outside Chinese sovereign territory and to be issued from and distributed within Europe and Asia. It is being launched in London and listed on the London Stock Exchange with the aim of tapping the growing pool of RMB liquidity across Europe.

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Commenting on the issuance, UK Chancellor George Osborne said:

London is the world's most pre-eminent financial centre and we are not prepared to let anyone steal a march on us when it comes to new products and new markets. In the coming decades it is China that will act as a powerhouse of the world economy.

The Chancellor, however, made it clear that London is not in competition with Hong Kong. Instead, he said the vision was for London to be a complement, providing a Western hub for renminbi business.

HSBC is offering a three-year yuan bond at 3.0 to 3.25 percent, aimed at raising 2 billion yuan ($320 million). The issuance comes amid significant reforms by Beijing to push ahead with internationalisation of the yuan, including a widening of the yuan's trading band to 1 percent from 0.5 percent that went into effect on Monday.

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Chinese regulators this month also increased the quota for the Renminbi Foreign Qualified Institutional Investor (RQFII) program, which allows Hong Kong investors to purchase yuan-denominated funds using yuan accumulated offshore, to 70 billion yuan from 20 billion yuan.

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But at $320 million, the Wall Street Journal points out that the total size of the bond was relatively small, making it a 'largely symbolic issuance that demonstrates little more than Chinese support for the city's development as a hub for the yuan.'

According to the Journal, the London listing did not necessary enhance liquidity nor did it supplant other other markets for dim-sum bonds, such as Singapore, where these bonds can be traded but haven't yet been issued.

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