Central bank to push more corporate bonds

“Our financial system is immature and one of the main reasons is our corporate bond markets are so small,” the People’s Bank of China said in a statement posted on its Web site. “We need more forms of corporate financing in order to create a healthy market.”

Most companies in China rely on bank financing, totaling 2.3 trillion yuan (US$310 billion), while listed companies have raised 1 trillion yuan from the stock markets and only 880 billion yuan from corporate bonds, according to the central bank.

China in August issued rules allowing more listed companies to sell corporate bonds on a trial basis in an effort to encourage the growth of the local market for the securities. Companies that have listed their shares on either the domestic or overseas exchanges can sell corporate debt, China Securities Regulatory Commission said in a statement posted on its Web site.

China Petroleum & Chemical Corp., Asia’s largest refiner, last week said it plans the nation’s biggest corporate bond sale as part of proposals to raise as much as 50 billion yuan to finance gas and chemicals projects.

To increase corporate debt trading, insurance companies may be allowed to buy unsecured corporate debt after the regulator loosens its control on investment by insurers, Tu Guangshao, vice chairman of China’s securities regulator, said in an interview on Sept. 12. He said the market will increase the funding options for companies, a few of which had submitted applications to issue debt since the publication of the rules.

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