Top China banker calls for U.S. sales of yuan bonds

By Martin Howell

NEW YORK (Reuters) - A top Chinese banker on Sunday called on the U.S. government and the World Bank to sell yuan-denominated bonds in Hong Kong and Shanghai to encourage the development of debt markets in those centers and to promote the yuan as a major international currency.

"I think the U.S. government and the World Bank can consider the possibility of issuing renminbi bonds in the Hong Kong market and the Shanghai market," said Guo Shuqing, the chairman of state-controlled China Construction Bank (CCB), the world's second-biggest bank by market value.

In an interview with Reuters, Guo said it was in American interests to see the yuan, also known as the renminbi, become a currency that is traded across the globe. He said that is largely because of the symbiotic relationship between U.S. purchases of Chinese goods and China's purchases of U.S. assets with the proceeds.

Guo, who is a former head of China's foreign exchange administration, said there should be "mutual cooperation" between the U.S. and China to promote China's financial sector and markets.

Guo, who was visiting New York to mark the upgrading of CCB's representative office in the city to branch status, said that the bond issues could be relatively small -- perhaps 1-3 billion yuan ($142 million-$436 million).

He said that developing the Chinese debt markets would help major U.S. companies such as General Electric Co, which needs to fund major investments in China, as well as institutions such as the World Bank, with major commitments there.

He said that foreign currency risk, particularly the risk that the yuan would continue to appreciate against the U.S. dollar as it has in recent years, could be hedged.

Last Wednesday, banking groups HSBC Holdings Plc and Standard Chartered Bank both said they were preparing for yuan-denominated bond issuance in China to help the country develop its local-currency financial markets.