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‘Ahead of the curve’: Allen & Overy and Clifford Chance act on UK government’s landmark renminbi bond issue

Magic Circle firms Allen & Overy (A&O) and Clifford Chance have advised on the UK’s renminbi debut bond issue, the first for a non-Chinese sovereign and signalling the first steps of China’s currency internationalising.

The 2.70% three year bonds were almost twice oversubscribed and, at RMB3bn, it was the largest renminbi issue so far by a non-Chinese issuer. The bonds were allocated to a wide range of investors including central banks, bank treasuries and fund managers across the world.

Clifford Chance represented the Bank of England and HM Treasury, led by banking partner David Dunnigan, while A&O advised Bank of China, HSBC and Standard Chartered as joint arrangers on the transaction, led by London-based capital markets partners Geoff Fuller and international markets partner Matthew Hartley.

Hartley said: ‘The Renminbi bond market has been growing in the last few years. The UK government is the first non-Chinese sovereign to come into that market and brings in a new asset class. So far, it has been the Chinese government, Chinese banks and other multinationals that have offered Renminbi bonds. I anticipate that this will encourage other governments to bring similar products to the market.’

The deal marks the UK governments’ interest in becoming a renminbi hub, as well as representing a significant step in the internationalisation of the Chinese currency. The funds will be used to diversify the UK’s reserves, which have only included financial assets denominated in Canadian and US dollars, euros and yen. The proceeds are expected to be reinvested in the small but rapidly-growing renminbi offshore market.

A&O capital markets partner Geoff Fuller said: ‘The renminbi is quickly becoming a vital part of the currency mix, and the UK has shown itself to be ahead of the curve once again by being the first Western sovereign to raise debt finance in this way. We expect this will prompt market participants from both the private and public sectors to follow.’