China’s relationship with the US dollar has been fraught and hyper-emotional over the years since the country abandoned hard-line communist principles in favour of the free market.

While China suffered through accusations of being a major currency manipulator by a few US administrations, they have regarded the renminbi as a reserve currency in waiting. Donald Trump’s burgeoning close relationship with China’s Xi Jinping has rendered him silent on the topic after much bellicose shouting on the presidential campaign trail.

At some point China will have their moment if they can stomach opening up the country’s capital account to the dangers of free-flowing foreign exchange transfers. In the meantime, the most fascinating element of China’s relationship with the dollar lies in the quasi-addiction many of its enterprises have to raising capital via the greenback.

Nowhere has this been truer than in the case of China’s real estate developers, many of which have relied on the offshore dollar markets for capex funding. That’s why I found China’s recent announcement that it would tap the offshore dollar bond markets intriguing to say the least. The last time China did so was nearly thirteen years ago.

The country sits on the world’s largest stockpile of foreign exchange reserves – just over US$3 trillion at the last count – and hardly needs the US$2 billion it has circled for the size of its planned return to the G3 public primary bond markets.

It would be easy to read the dollar bond plans as a riposte to the snub China received in May from Moody’s when it was downgraded to A1 from AA3, but according to Asia-based syndicate bankers I spoke to recently, the plan to tap the bond markets had been cooking quite a while before the ratings action.

But of course that ratings action was simply grist to China’s mill of symbolism that will be churning at full speed when the planned new bond issue enters execution. The last time China deigned to grace the G3 offshore markets with its presence was in the late 1990s – in 1996 and 1997 to be precise – when the sovereign tapped century paper and a thirty-year. Symbolism in that case was built around the impending handover of Hong Kong. The ultra-long formats were a suitable piece of grandstanding.

Now that China no longer presides over easy-peasy double-digit GDP growth it makes sense to issue in relatively small size. Although today’s 6.9% second quarter growth data was the stuff many countries – not least the United States – would give rather a lot to be able to chalk up.

After all, from the Treasuries plus 60bp-odd which is being mooted for China’s issuance, which is planned to merge over the next six months, a substantial spread compression would reinforce the country’s secular emergence as the world’s largest economy. An eventual flat spread to US Treasuries seems more than possible, or given the restricted free float of the planned issuance, a deal that traded through Treasuries in secondary is also not a far-fetched prospect. That would be nirvana for China.

There’s another point to the issuance too. Lots of onshore money managers in China have loaded up in recent years on US dollar paper issued by Chinese corporates. Chinese banks have typically ended up with the bulk of new issues, with offshore capital’s access to the primary paper restricted in syndication.

That has served Chinese investors well, given the steady decline over the past few years of the Chinese unit. But the fear now is that as the renminbi shows signs of strengthening, Chinese investors will rush en masse to liquidate.

Were that to happen, the Chinese secondary corporate curve would ratchet up. What better time for corporate China to have a relatively rich sovereign benchmark off which to price? Those clever Chinese…