London set to be the first financial centre in the West to offer Chinese sovereign debt
The UK government had successfully issued a sovereign renminbi bond in October 2014 Reuters

The People's Bank of China (PBoC) is set to issue government debt in renminbi (RMB) in London. The scheme would make the city, the first financial center outside China, to offer the Asian country's sovereign debt.

The move could be formally announced during Chinese President Xi Jinping's visit to the UK next week. PBoC plans to first launch short-term debt, which would act as a foundation for the launch of Chinese treasury bonds in renminbi in London, the Financial Times reported.

This would make the capital city, which is also the European base for many Chinese banks, the preferred location for development of the RMB in Western time zones. Meanwhile, Chancellor George Osborne had visited China in September, where he had announced that the two countries had signed 53 agreements at the UK-China Economic and Financial Dialogue in Beijing.

At the time, Osborne had said, "I have strongly supported China's efforts to increase the international use of the renminbi. And make no doubt about it, I want the UK to be the natural Western hub for renminbi trading."

"This is a major step in developing this market infrastructure. I believe it cements London as the pre-eminent location for RMB trading and Chinese investment in the West," he said and added, "Investors still had a huge appetite for trading offshore renminbi irrespective of the recent market volatility."

PBoC recently devalued its currency, which analysts felt was to depreciate its value, but Premier Li Keqiang, had reiterated that there was no basis for continued yuan depreciation. And the issuance of RMB bonds in London seems like a step to prevent it from further depreciating.

"We will actively nurture capital markets that are open, transparent and stable in the long term," Keqiang had said following the meeting with the British chancellor.

And William Ma of Gottex Asset Management shared the same view and said, "I think it's a kind of much-needed positive signal, and it kind of reconfirms the Chinese government's determination in terms of interest rate liberalisation and renminbi internationalisation."