A symbolic step forward for China

published 27 August 2010

McDonald's raised its profile in China this week by becoming the first foreign non-financial company to issue debt denominated in Chinese yuan (RMB). The fast food chain raised 200RMB (£18.5m) with 3% notes that are due for repayment in 2013.

The bond issue was handled by Standard Chartered Hong Kong. Despite only being available to institutions, funds and professional investors, the issue was sold out within two hours.

What the commentators said

The bond itself is "small in relation to the size of McDonald's balance sheet", said James Quinn in The Daily Telegraph. But it's symbolic because it reflects McDonald's aspirations in China, and China's plans to reform its currency.

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The bond is further evidence that "China is on the cusp of a big bang of reforms that will give foreign investors greater access to China's capital markets", said Bloomberg's Patricia Kuo. There will be massive demand from companies wanting to be involved, which will also strengthen Hong Kong's position as a financial centre. A key precedent has been set.

While it's true enough that Beijing is using Hong Kong as a "test", the ramifications of this move won't just be confined to Hong Kong or China, said Julia Leung in the Wall Street Journal. A more international yuan would "diversify" the global monetary system and create a "more stable financial architecture".