The Hong Kong and Shanghai Banking Corp has become the first overseas financial institution approved to underwrite government bonds on China's mainland.

The Chinese Ministry of Finance gave permission to HSBC's Shanghai Branch to become a member of the 47-seat underwriting committee for the issuance of government bonds in 2004. This will enable the bank to provide more renminbi services to its clients.

HSBC is the first and only overseas bank to be granted this membership, which will allow HSBC to underwrite and resell renminbi bonds to nonmembers, said Zhang Dandan, a spokeswoman for HSBC China.

There are more than 1,000 domestic and overseas financial institutions registered in China Government Securities Depository Trust & Clearing Co, which is the sole custodian entity for financial institutions in the country's interbank bond market.

"A growing number of clients are interested in renminbi bond investments at present due to its stable return and comparatively higher interest than bank deposits," said Zhang.

"The membership will enable us to offer more local currency products to our clients."

HSBC submitted its application to the ministry two years ago. Its Shanghai Branch is active in bond trading in the Shanghai-based national interbank bond market which hosted 53 overseas banks including Citigroup and Standard Chartered Bank as its members.

(Shanghai Daily February 18, 2004)