Firms with Good Standings Allowed to Issue Bonds in Offshore Markets
Chinese firms with good credit standings were told by the nation’s top economic planner to issue bonds in cheaper offshore markets in support of domestic investment and major national projects. The National Development and Reform Commission said offshore borrowing would support initiatives such as the Belt and Road undertaking, the Yangtze River belt project and the unified Beijing-Tianjin-Hebei region.
According to the planning agency they are encouraging companies to get commercial oans, both in bonds and loans must be of one year in duration or longer and must be denominated in yuan or any other foreign currency. Also the current foreign debt issuance approval process will be suspended. Instead these firms will apply to participate in a new registration system in advance and report new issuances or borrowing to the National Development and Reform Commission in ten working days. The NDRC continues to set a overall annual limit of overseas debt financing, even after five interest rate cuts in the past year and the Chinese investment grade onshore corporate bond will yield generally significant higher that in those major OECD markets
A urban fixed assets investment growth slid down in August to a 15 year low, Chinese policy makers are searching for ways to push growth. Given a wide access to foreign debt markets can help several firms to secure cheaper credit, but might not have a impact at a time when companies are eyeing the potential fall in the Chinese yuan.
In August, China surprised the world market by announcing a new currency fixing program which devalued the yuan by 3 percent, and the recently released report in August showed that Chinese banks sold 723.8 billion yuan in foreign currency. Chinese corporates are already borrowing significant amounts in dollars over the past several years and a small portion of the foreign currency sales are reflected moves that is intended to reduce future currency risk.