Appetite for yuan assets sees London Clearing House accept dim sum bonds as collateral

The London Clearing House (LCH) has begun accepting offshore yuan-denominated Chinese government bonds as eligible non-cash collateral, marking a structural milestone in Beijing’s decade-long push to internationalise its currency and integrate its debt into global financial pipelines.

The decision by LCH – a major derivatives clearing house owned by the London Stock Exchange Group – allows investors to use offshore yuan sovereign bonds, or dim sum bonds, to meet margin requirements.

The move comes amid a growing appetite for yuan assets, driven by China’s expanding multitrillion-dollar domestic bonds market, the world’s second-largest.

Bank of China, the nation’s most internationally active lender, led the roll-out. It said three of its overseas units – BOC Hong Kong, its London branch and its Hong Kong branch – executed the first transactions using offshore bonds as collateral on July 7.

BOC Hong Kong also facilitated several institutional clients’ depositing of the bonds, which were settled through Euroclear Bank.

Historically, foreign investors faced hurdles utilising yuan assets in Western clearing houses due to a strict collateral framework that favoured United States Treasuries and European bonds.