The Chinese Ministry of Finance said on Tuesday that it would issue 6 billion yuan worth of government bonds in Hong Kong, a major step to internationalise its currency at a time of concern about the dollar. The yuan bond issue, the equivalent of $879 million, will “promote the yuan in neighboring countries and improve the yuan’s international status,” the ministry said on its Web site.

“The first step toward internationalisation is regionalisation,” Shi Lei, a currency analyst at Bank of China in Beijing, said during an interview. “China wants to develop the offshore market in Hong Kong.”

While domestic banks like Bank of China and the Export-Import Bank of China have issued yuan-denominated bonds in Hong Kong for a couple of years at the encouragement of Beijing, this is the first time that government bonds, comparable to US Treasury securities, are to be issued. The sale is set for September 28.

In July, the People’s Bank of China, the country’s central bank, started a program for local companies to settle trade in yuan, but it has so far spurred little trade. Zhi Ming Zhang, an analyst at HSBC in Hong Kong, said the government bond issue might show foreign investors they could rely on the yuan.

“If I’m doing trade with China, where am I going to park this money?” Zhi asked, referring to the yuan. The yuan-bond market needs security and liquidity to make such settlements attractive, he said, and government bonds will provide security and a pricing benchmark.

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