China Eases Controls on Corporate Bond Sales as Growth Slows

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  • AAA rated notes could be waived from internal review
  • Chinese firms have sold 6.79 trillion yuan of bonds this year

A bond regulator in China has said it will ease controls on corporate debt sales as economic growth slows.

The National Development and Reform Commission, which oversees state-backed companies’ bonds, mostly local government financing vehicles’ notes, said AAA rated notes or securities whose issuers have AAA scores could be waived from internal review procedures and get sale approval directly from the regulator, the statement said. Debentures backed by guarantors with good credit or bonds rated AA+ or above with asset pledges can also get the waiver, the statement said.

Premier Li Keqiang is encouraging more bond offerings to help stem the worst economic slowdown in a quarter century. Chinese companies have sold a record 6.79 trillion yuan ($1.06 trillion) of notes this year, already 14 percent more than all issuance in 2014, according to data compiled by Bloomberg. While sales from local government financing vehicles slumped after authorities increased scrutiny of their borrowings, the tweak could prompt "an explosive increase" in LGFV offerings, according to Western Securities Co.

“Local governments are short of money," said Li Ning, general manager of fixed income department at the brokerage in Beijing. "The rule change is part of the government’s loose fiscal policy to help save the economy.”

LGFVs have sold 754.84 billion yuan bonds this year, less than a third of the record 2.38 trillion yuan in 2014. Li estimates LGFV issuance next year may exceed that in 2014.

When applying for bond sales, issuers are no longer required to provide comments from provincial NDRCs, prospectus synopses, approvals from local government, lead underwriter’s due diligence reports and underwriter contracts or pricing reports, the statement said.