Economic Planners Warns on the Risks of Issuance in the Bonds Market

Economic Planners Warns on the Risks of Issuance in the Bonds MarketThe country’s top economic planners are warning on the increase on the risks in the corporate bond market in the country and are raising the threshold for the new issuance as a part of the market that it regulates. The National Development and Reform Commission is the one responsible in approving the issuance of non listed companies bonds with tenors of up to one year and above, has delivered a warning directly to under writers.

The new requirement will be strengthened but needs to pass through the National Development Reform Commission first. The amount of the approved corporate bonds that were issued in h first half of the years has reached 491 billion yuan which exceeded last year’s 471 billion yuan in what analysts say is attributed to the government decision to loosen liquidity in response to a slow growth. The NDRC gave proposals and asked several institutions on feedback along with suggestions that the new requirements must be rigorous and not impractical.

Companies now need to only register with the NDRC in issuing bonds instead of going to formal approval procedures, and companies must prove their asset liability ratio is below 20 percent which is decreased from the previous 30 percent. Meanwhile industrial companies have to demonstrate their asset liability ratio is below 60 percent to avoid any additional scrutiny from the regulatory board for bond issues. Local government financing vehicles are now required a special examination is their asset liability ratio s at 75 percent or more and may o through a stricter process of they reach 70 percent together with tighter steps in issuance.

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