Bonds Jul 13

China's test of interbank bonds to fund real economy 'a success'

Dealers Association says a new measure for the bond market has helped stimulate growth and enhance the ability of targeted issuance to serve the real economy

China test of interbank bonds to fund real economy 'a success'
A file photo of a branch of China Citic Bank Corp in Shenzhen city, in southern China's Guangdong province. A new measure for the inter-bank bond market has been rated a success in helping to stimulate growth and enhance the ability of targeted issuance to serve the real economy. Photo: Duan Bayi / Imaginechina via AFP.

(ATF) After trialling the method since April, the China Inter-Bank Market Dealers Association has issued a new measure for the inter-bank bond market to do a further "innovative test field" – to stimulate growth and enhance the ability of targeted issuance to serve the real economy.

New "Regulations on the Registration of Definite Issuance of Debt Financing Instruments for Non-Financial Enterprises (Version 2020)" are now on the books.

The test launch of a targeted issuance system started in April and has been popular due to its simplified registration procedures, flexible information disclosure, non-discrimination on types, and tailoring bonds to specific needs. As of the end of May 2020, more than 2,300 companies had registered 8.8 trillion yuan of targeted debt financing instruments, with a cumulative issuance of 5.6 trillion yuan.

The directional issuance system has the important function of coming up with different kinds of financial products. Previous experiments were asset-backed notes, project income notes, panda bonds, merger and acquisition bonds, and venture capital bonds.

"In the critical period of increasing support for the real economy, the new version of the directional issuance system has built a more open, inclusive and efficient 'incubation platform' for product innovation, which can effectively stimulate the vitality of various market players and enhance the precise service of the bond market, plus the capacity and efficiency of the real economy," Kuang Yanhua, head of investment banking at China CITIC Bank's head office, told Xinhua.

Since the beginning of this year, the inter-bank bond market has undergone frequent reforms: the introduction of asset-backed commercial papers, the release of "Guidelines for the Non-financial Enterprise Short-term Financing Bonds Business", six other self-regulatory rules, and more.

It is believed that the new regulation helps the financial supply-side structural reform, which will help to further increase the proportion of China’s direct financing and promote the real economy and the financial system.