This first offshore yuan-syndicated loan to an Australian company comes at a time of growing doubts about the stability of the US dollar, which has dropped almost 10 per cent this year against a basket of major currencies, amid the erratic trade policies of President Donald Trump. Beijing sees a window of opportunity to accelerate its global push for the yuan.
For Fortescue, it’s a good deal. The Australian dollar has dropped nearly 10 per cent against the US dollar in the past year but less so against the yuan. Moreover, Chinese banks charge around 4.9 per cent interest for a yuan loan longer than five years, but 5.23 per cent if the same loan is made in US dollars. A large syndicated loan like Fortescue’s would enjoy even lower rates.
It has pledged to strengthen the offshore market and provide stable liquidity while speeding up the development of the yuan-denominated Cross-border Interbank Payment System (CIPS), Beijing’s alternative to the Society for Worldwide Interbank Financial Telecommunication (Swift) system.
