China Said to Plan Letting More Companies Sell Short-Term Debt

China plans to let more companies sell short-term debt that matures in 270 days or less, said two people with direct knowledge of the matter.

The National Association of Financial Market Institutional Investors, which regulates the sales, will require issuers to have a credit grade of AA+ or above from China Credit Rating Co. in addition to a similar rating from another company, said the people, who asked not to be identified as they weren’t authorized to speak publicly about the plans.

The requirement for a ranking from China Credit Rating, which NAFMII set up in 2010, will ensure companies with large debt burdens aren’t allowed to sell short-term commercial paper, they said. Almost all companies set up by local Chinese governments to fund infrastructure projects aren’t currently able to get that rating, they said.

Allowing more companies to issue short-term debt is the latest step authorities have taken to expand China’s debt markets as they push firms to rely less on bank loans and more on bond and share sales for funding. Sales of domestic corporate bonds totaled 876 billion yuan ($144 billion) in the first nine months, more than double total annual sales in 2010, according to data compiled by Bloomberg.

The Wall Street Journal reported on the rule change earlier. Calls to NAFMII’s international department, which handles inquiries from foreign media, weren’t immediately answered today.

NAFMII, which is controlled by the People’s Bank of China, held a meeting with financial institutions on Oct. 22 to discuss the rule changes, the people said. A date for implementation has yet to be announced, they said.

In addition to the credit ratings, NAFMII will also limit issuers to companies that have sold at least three bonds that raised a minimum 5 billion yuan in total during the past three years, the people said.

Currently, only companies controlled by China’s central government are allowed to sell debt maturing in 270 days or less. They must also have a credit rating of AAA. The AA+ rating issuers will need from China Credit Rating is equal to an AAA rating from other companies, the people said.

— With assistance by Steven Yang

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