Given the growth potential of the massive Chinese market, Export Development Canada (EDC) is helping to open some future doors after issuing its second dim sum bond last week. EDC was actually the first ever Canadian entity to issue a dim sum bond, back in June of 2013. This recent issuance is their second dim sum bond for a value of RMB 306 million.
Dim sum bonds are denominated in Chinese yuan but issued in Hong Kong. They’re particularly attractive to foreign investors that want some exposure to yuan-denominated assets, but are restricted by China’s capital controls from investing in domestic Chinese debt.
How does issuing dim sum bonds help Canadian exporters?
Down the road if a Canadian exporter is selling to a Chinese customer who wants to transact in renminbi, they now have a financial institution that can help them deal in the local currency. The government of British Columbia has also issued dim sum bonds.
“China shows a great deal of growth potential for Canadian exporters,” says EDC Vice-President and Treasurer, Susan Love. “So we’re committed to supporting the long-term development of this market. Hopefully this will help open doors to new investors, raise Canada’s profile in the region and increase the presence of Canadian companies in China.
In fact, China has become Canada’s second-largest and fastest growing commercial partner, and is poised to become the world’s largest economy in a few years. Canadian exports to the country reached $20 billion in 2013 and imports hit $52-billion and there are currently 300 Canadian companies doing business in China. In 2013, EDC’s customers conducted $6.7 B in business in China.
“These companies are committed to investing and expanding,” says EDC Chief Representative for Asia, Denis L’Heureux, from his base in Shanghai. “China is still delivering growth levels that are the envy of most developed economies. This is obviously a massive and growing market, full of potential for what Canadian companies have to offer.”
For more information on EDC’s Treasury activities see
Quick facts about Chinese currency
- The renminbi (RMB) is the official currency of the People’s Republic of China, and literally means “people’s currency”
- The yuan is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally, especially in international contexts. (The distinction between the terms “renminbi” and “yuan” is similar to that betweensterling and pound)
- China is hoping the dim sum bond market will eventually help internationalize the Chinese dollar
- Dim sum bonds are named after … you guessed it … dim sum