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China May Start High-Yield Bond Trials, CSRC’s Guo Says

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March 6 (Bloomberg) -- China may allow companies to sell high-yield bonds on a trial basis as soon as the first half as the government seeks to aid businesses struggling for funding, the head of the nation’s securities regulator said.

The China Securities Regulatory Commission hopes to allow sales of high-yield bonds as early as possible and may be able to start trials in the first six months of this year, Chairman Guo Shuqing told reporters after attending legislative meetings held in Beijing yesterday.

China raised interest rates three times last year as part of a campaign to curb inflation and rein in home prices, which also reduced the availability of financing for small and medium-sized businesses. Guo said in an interview with the official People’s Daily newspaper last month that the regulator was studying ways to help smaller companies raise funds through the sale of debt.

The companies selling the high-yield debt will be rated between BBB to AA-, said Zhou Yuanfan, vice president at Pengyuan Credit Rating Co. Ratings of AA or below in China denote similar credit worthiness as so-called junk ratings abroad, according to China International Capital Corp. the nation’s biggest investment bank.

China has encouraged companies to raise more funds by selling stocks and bonds in a campaign to wean them from a dependence on state-owned banks and increase the transparency of their finances.

The nation’s bond market needs to increase its innovation, the People’s Daily, published by the Communist Party, cited Guo as saying. The nation’s stock and bond markets still “seriously” lag the behind the demands of the real economy, Guo said in the interview published March 1.

To contact Bloomberg News staff for this story: Henry Sanderson in Beijing at hsanderson@bloomberg.net; Victoria Ruan in Beijing at vruan1@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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