IFC unveils new financial instrument for RMB internationalization

Find out what IFC's Global Discount Note Program is about.

According to a release, IFC, a member of the World Bank Group, introduced an innovative financial instrument to help China internationalize its currency, issuing the first renminbi-denominated note under its Global Discount Note Program.

The program is the first of its kind, enabling the regular issuance of discount notes in the offshore renminbi market and expanding the availability of short-term local-currency finance for private enterprises in the region. The discount note—equivalent to about $50 million—is denominated in CNH, the deliverable form of the Chinese currency that is traded outside mainland China.

The fast-growing CNH bond market was introduced as an offshore investment alternative to encourage greater renminbi-denominated trade between China and other countries. IFC is the first institution to launch a CNH discount note program to eligible institutional investors globally.

“The IFC discount note program introduces a new asset class for investors seeking high-quality credit, and short-term financing alternatives in the CNH market, contributing to the internationalization of the renminbi,” said IFC VP and Treasurer Jingdong Hua. “It reflects IFC’s strategy to meet the growing demand for localcurrency loans, especially at the short end of the maturity spectrum.”

Jaspal Bindra, Standard Chartered Group Executive Director and CEO for Asia, said: "IFC’s discount note program is yet another renminbi ‘first’ that Standard Chartered is proud to support. The launch of the program has positive implications for companies looking for renminbi-denominated financing, and for investors seeking exposure to the currency. We look forward to our continued involvement in the program as it develops.” Standard Chartered Bank is the sole arranger for the Global Discount Note Program and the sole arranger of the renminbi issue.

A discount note is a short-term debt obligation issued at a discount to par. Discount notes have maturities of up to one year and are typically issued by government-sponsored agencies or highly rated corporate borrowers. The renminbi notes have a three-month maturity.

Supporting the development of domestic capital markets is a priority for IFC in China. In 2005, IFC became the  first nonresident issuer of Panda Bonds—renminbi-denominated bonds issued in the domestic capital markets.

IFC also issues Dim Sum Bonds—renminbi-denominated bonds issued in the offshore renminbi capital markets. Last year, IFC committed the equivalent of $98 million in local currency to support health care, renewable energy, and access to finance for small and medium enterprises and other sectors. 

IFC set up a U.S.-dollar Discount Note Program and a Global Discount Note Program to increase its options for funding private sector development in emerging markets. Proceeds of the programs are used in part to fund the Global Trade Liquidity Program, a global initiative to address the shortage of trade finance resulting from the global financial crisis. In addition to issuing discount notes in U.S. dollars and CNH, IFC is exploring opportunities to extend the program to other emerging-market currencies where there is demand for short-term local-currency finance.

IFC is rated triple-A by Moody’s Investors Service and Standard & Poor’s.