VTB will become the first emerging-market issuer outside of China to issue a renminbi bond. The Russian bank plans to raise Rmb1bn ($150m) in three-year bonds at 2.95%.
The move will further strengthen ties between Russia and China. In September 2010, Industrial and Commercial Bank of China raised its credit line to VTB to $500m, from $200m, to support Russian imports from China. And China is now Russia's largest trading partner after the EU.
As trade between China and emerging markets increases and continues to drive the global recovery, deals between China and its trading partners are increasingly being settled in renminbi, as developing markets try to reduce their reliance on the US dollar.
The move also reflects the Chinese government's desire to boost the international role of the renminbi. China has liberalised the use of the currency offshore in Hong Kong, nicknamed the 'dim sum' market, allowing many foreign companies operating in China to access a new avenue for debt financing.
Several corporates have started to access the renminbi market. Hopewell Highway Infrastructure was the first multinational to tap the market in July 2009 with a Rmb1.38bn issue. Fast-food chain McDonald's and Caterpillar, the US equipment maker, followed suit with Rmb200m and Rmb1bn bond issues, respectively.
The market has already grown remarkably. According to data from the People's Bank of China, trade settled in renminbi between June and November in 2010 was Rmb340bn, rising rapidly from zero only 18 months ago.
Although the Chinese government's plan to liberalise its financial markets is gaining momentum, greater access to the mainland bond market is needed before the renminbi can be fully international.
