Wal-Mart may sell yuan-denominated bonds in Hong Kong

Wal-Mart Stores Inc., the world s largest retailer, is considering selling yuan bonds in Hong Kong as China opens its markets, according to Asia Chief Executive Officer Scott Price.

The company is considering options that may include yuan-denominated debt, Price said in an interview at Wal-Mart s Asia offices in Hong Kong yesterday. Such a move would underscore the company s commitment to support local communities and China s financial system, he said.

Wal-Mart is in Asia and in China for the long term, Price said. The company wants the Chinese people to know that we see a responsibility to help build their economy, he said.

China is expanding its financial system, and will use Hong Kong as a testing ground for yuan products, according to the city s former central bank chief Joseph Yam. Foreign companies in February became eligible to issue yuan bonds as part of efforts to bolster the ex-British colony s financial status and expand its role in promoting the yuan for commerce.

The company has $38 billion of outstanding debt and more than $5 billion of bonds maturing by the end of 2011, according to data compiled by Bloomberg. The Bentonville, Arkansas-based retailer could be the first foreign non-financial company to issue yuan debt in Hong Kong.

Bank of East Asia Ltd. and HSBC Holding Plc s China unit sold yuan bonds in Hong Kong in 2009, becoming the first overseas banks to do so. Hong Kong s dollar is pegged to the U.S. currency, while the yuan, used on the mainland, isn t freely convertible.

Asia Push

The average cost of borrowing in local currencies in Asia has narrowed 0.26 percentage point this year to 4.3 percent, according to the HSBC Asian Local Bond index. That s below the nine-year average yield of 4.93 percent from 2001 to 2009, the index shows.

We will look at and consider financial mechanisms that can help build the economy in region, Price said. We take it very seriously.

Wal-Mart competes with France s Carrefour SA in China. The world s biggest company by sales operates at about 651 locations in China, India and Japan and is accelerating expansion in Asia as the region s economy outperforms other markets. It plans to open more stores in China than the 56 new outlets last year, and will probably grow by acquisition in Japan, Price said.

Almost 25 percent of Wal-Mart s net sales came from its international operations for the fiscal year ended January, the company said in its earnings distributed by PR Newswire Feb. 18. Wal-Mart s overseas net sales grew 1.3 percent to $100.1 billion in the fiscal year.

Overseas revenue is growing faster than U.S. sales and more than half of the company s growth in stores floor area came from its international business.