Australian central bank to invest 5 per cent of currency reserves in Chinese government bonds

SYDNEY – Australia’s central bank said Wednesday it will invest up to 5 per cent of its foreign currency reserves in Chinese government bonds as economic and business ties between the two countries deepen.

The Reserve Bank of Australia said it will be the first time it has directly invested in the sovereign bond market of an Asian country other than Japan.

Deputy Governor Philip Lowe said in a speech in Shanghai and posted on the bank’s website that it expects China’s yuan to eventually become one of the major reserve currencies in the region.

He said the plan to invest in Chinese government bonds reflects Australia’s broader economic relationship with China, which is the world’s second-largest economy, and increased financial ties.

China’s is Australia’s largest export market, driving a boom in the South Pacific nation’s mining industry.

Australia and China earlier this month agreed on direct trading of the Australian dollar and the yuan.