Govt urged to liberalize corporate-bond market ( 2003-12-13 15:56) (China Daily HK Edition)
Amid increasing financing
needs of domestic enterprises, China has been urged to simplify the official
review of corporate-bond issues and allow a wider range of players and trading
products.
Bank loans are still a major financing resource for domestic enterprises, but
the bond market has much bigger potential for growth based on strong demand,
said Yang Hongming, executive director and vice-president of Beijing Datang
Power Generation.
Yang's company, listed in Hong Kong and New York, has already acquired 80
billion yuan (US$9.7 billion) in credit lines from banks.
It is also planning an A-share initial public offering on the mainland, but
Yang told China Daily that bond issuance, a more economical financing channel,
is an inevitable medium-term target for the company.
"We hope the authorities can pass on bond-issue power to the market so that
every company will get an equal chance and shoulder its own risks," he said.
While the stock market has been expanding rapidly, the underdeveloped
corporate bond market has to secure government approval for each new bond issue;
and the types of investors are very limited.
It often takes several months for the National Reform and Development
Commission (NRDC) to complete the review of application documents and another
few months for the State Council to give the final approval.
NRDC has been in the process of amending the regulation on corporate bonds
for years, but there is no timetable as to when it would be announced..
Permission is usually granted to large infrastructure construction projects
and big State-owned enterprises, while smaller and private businesses are
blocked out.
This has led to the small size of the market, around 50 billion yuan (US$6
billion) in new issues this year, only a fraction of the overall bond market
dominated by treasury and financial bonds.
But the potential investor demand is big in China, which has more than 10
trillion yuan (US$1.2 billion) of savings, said Anita Fung, treasurer and
co-head of global markets, Asia-Pacific at HSBC.
If the country wants to further develop the bond market, it also needs to
come up with more hedge products, she said, adding that credit-rating services
also have to catch up if bond issues are to be market-driven.
Once the corporate bond market opens wider, the demand for professional
credit rating, which informs investors of potential risks, will also grow, said
Michael Ye, managing director, China financial markets, Moody's Asia Pacific.
The legal framework should also be consolidated, such as the bankruptcy law
and rules that ensure protection of creditors and clarify the obligation of
debtors, he said.
