SOUTH KOREA is poised to become the first sovereign to sell yuan-denominated debt in China, setting a benchmark for companies seeking to expand in the nation’s biggest export market.

    The need for yuan funding is rising as Korean corporations boost investment in China, Song In Chang, the Finance Ministry’s director general, said in Seoul on Tuesday. The panda bonds will also allow South Korea to diversify its foreign currency issuance, he said.

    China wants to increase the yuan’s global use and win its inclusion in the International Monetary Fund’s basket of reserve currencies.

    It agreed at an Oct. 31 meeting in Seoul between South Korean Finance Minister Choi Kyung Hwan and Xu Shaoshi, chairman of the National Development and Reform Commission of China, to back the bond plan as well as direct trading in yuan-won in Shanghai.

    The Canadian province of British Columbia also said last month it is in discussions to sell panda debt on the Chinese mainland as it seeks closer business ties with the world’s second-largest economy.

    “Local investors have been interested in yuan-denominated bonds, but there were no credible benchmarks,” said Lee Jae Hyung, a fixed-income strategist at Yuanta Securities Korea Co. in Seoul. A sale by South Korea’s government “will be a catalyst for issuance by local companies,” he said.

    (SD-Agencies)