U.S. construction equipment maker Caterpillar Inc. plans to issue a 1 billion yuan, or $150 million, two-year bond issue in Hong Kong, people familiar with the situation said Wednesday, becoming the second non-financial multinational company to tap the city’s growing yuan-denominated bond market.

The Peoria-based company is marketing the yuan bond to institutional investors with an indicative coupon of around 2.25 percent, said a banker familiar with the matter. The company plans to use the proceeds from the bond to fund its operations in China, said another person familiar with the situation.

Caterpillar, the world’s biggest manufacturer of bulldozers, excavators, wheel loaders and other construction machinery, has been rapidly expanding its production capacity in China, like many U.S. and European manufacturers. It already employs more than 7,400 people in the country and last week announced plans to build a $300 million plant in the eastern Chinese city of Tianjin to produce its 3500-series machinery engines for customers in Asia.

China has allowed certain mainland financial institutions to sell yuan bonds in Hong Kong for several years, but the market for yuan-denominated debt outside the mainland only began to take off in recent months as Beijing relaxed rules to allow foreign firms to issue yuan bonds in Hong Kong.

Strong international demand for such yuan-denominated products is being fuelled in large part by expectations the currency will appreciate, and foreign investors that invest in yuan debt sold in Hong Kong can avoid the strict capital controls in mainland China.

Several banks have issued offshore bonds denominated in yuan, also known as the renminbi, and other companies have begun following suit. In August, McDonald’s Corp. raised CNY200 million in yuan-denominated bonds sold in Hong Kong to finance its expansion in China.

The 2.25 percent indicative coupon for Caterpillar’s yuan bond issue is lower than the McDonald’s bond, which carries an annual coupon of 3 percnet and attracted strong demand from institutional investors.

“The coupon isn’t very attractive. There are many choices in the market that investors could shop around for higher returns,” said a trader at a Chinese bank.

Still, Tommy Ong, senior vice president of treasuries and markets at DBS Bank, said he expects strong demand from institutional investors for Caterpillar’s bond, given that banks in Hong Kong have around CNY150 billion in yuan deposits but few yuan assets to invest in.

Caterpillar’s planned issuance comes two days after China’s Ministry of Finance announced details of an CNY8 billion bond issue in Hong Kong that will include bonds with long tenors, a move intended to establish a benchmark yield curve in the city.

Apart from McDonald’s, non-Chinese issuers of yuan-denominated debt in Hong Kong have so far included the Asian Development Bank. The World Bank’s financing arm, International Finance Corp., as well as Russian aluminum giant United Co. Rusal PLC have also indicated their intention to sell yuan bonds in the city.

Goldman Sachs Group Inc. is arranging Caterpillar’s bond issue, said the second person familiar with the situation.