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China’s top financial brass outline all reforms of 2020

(ATF) The association of Interbank Market Dealers has called to give full play to the advantages of the interbank bond market to provide strong financing support for market entities.

On September 29 and 30, the Central Bank held a series of press conferences on “Financial Support to Market Entities.” Cao Yuanyuan, deputy secretary-general of the Interbank Market Dealers Association, said at the press conference that this year the Dealers Association had given full play to the advantages of the interbank bond market and provided strong support for the financing of market entities. It has carried out several aspects of work, the Securities Daily reported: 

Firstly, Cao said they have established a green channel (fast channel) for registered issuance to help corporate bond financing withstand the impact of the epidemic.

Secondly, they have deepened hierarchical and classified management to improve investment and financing accessibility for market players. Thirdly, they have continued to enrich the varieties of debt financing instruments to provide all-round support for corporate financing. Fourth, they have promoted the establishment of a system for handling breach of contract disputes and worked to boost management of self-discipline.

Luo Yanfeng, deputy director of the General Office of the People’s Bank of China, presided over the press conference. Other top officials who attended included Lu Dabiao, deputy director of the Corporate Bond Department at the China Securities Regulatory Commission; Yin Xingshan, president of the PBoC’s Hangzhou Center Branch; Cao Yuanyuan, deputy secretary-general of the Interbank Market Dealers Association; and Wu Jun, general manager of China CITIC Bank’s Inclusive Finance Department. They all answered questions from reporters, the paper.cn reported.

Regulatory Commission

Commenting on deepening market reforms, Lu Dabiao said the work carried out by the capital market in securing market entities mainly included four aspects – steadily advancing reform of the registration system and increasing support for the real economy. On the premise of adhering to quality first and taking into account market stability, he said the CSRC would continue to steadily promote the normalisation of new share issuance, optimise the review process’, shorten the review cycle, and support more eligible companies for initial IPO financing and refinancing. At the same time, the registration system reform centered on information disclosure has been steadily promoted. The Sci-tech Innovation Board had been operating steadily, he said. 

A Growth Enterprise Market reform and pilot registration system had been implemented. The institutional environment for corporate equity financing has been continuously optimized, especially the predictability of corporate issuance and listings. From January to August this year, a total of 227 companies were listed for the first time on the Shanghai and Shenzhen stock markets, with financing of around 307 billion yuan. Meanwhile, the China Securities Regulatory Commission approved a financing amount of 501.4 billion yuan issued by 259 listed companies. Remaining approved issuance will realized financing of 414.7 billion yuan.

Secondly, the CSRC is promoting market-oriented reform of mergers and acquisitions. Payment instruments for mergers and acquisitions are carrying out pilot projects for the directional issuance of convertible bonds by listed companies.

From January to August this year, there were 1,648 market-wide M&A transactions, with a total value of 977.5 billion yuan, ranking second in the world for the seventh consecutive years.

The CSRC will reform of the New Third Board and broaden the direct financing channels for SMEs. In July this year, the NEEQ selection layer officially opened, and the first batch of 32 companies were listed for trading. After the NEEQ reform, the coverage and inclusiveness of capital market service companies has further improved, and the availability of capital market services for SMEs has continued to increase. As of September 18, there were 8,408 companies listed on the New OTC Market, including 32 selected companies and 1,177 innovation companies. The total market value of these companies is 2.76 trillion yuan. Companies listed on the New OTC market from January to August this year used the NEEQ to achieve financing of 22.913 billion yuan.

Fourth, the CSRC will be giving full play to the positive role of the bond market in serving market entities. The exchange bond market continues to promote bond product innovation. On April 30, 2020, the pilot infrastructure REITs was launched to support the revitalization of stock assets. At the same time, it launched a pilot public offering of short-term corporate bonds to meet the needs of high-quality issuers for short-term financing and liquidity management. 

Debt management tools such as bond repurchases and bond swaps have been introduced, while studies have supported bond-issuing companies to carry out market-oriented debt-to-equity swaps, and specific bond transfer mechanisms and anonymous auction mechanisms have been introduced to provide more options for companies to ease the pressure of repayment. From January to August, non-financial corporate bond issuance on the exchange market was 2.14 trillion yuan, a year-on-year increase of 37%, and net financing was 1.47 trillion yuan.

It is hoped that the new net financing of corporate credit bonds set by the executive meeting of the State Council at the beginning of the year will exceed the previous year by 1 trillion yuan. On the downside, from January to August, the weighted average interest rate of publicly issued corporate bonds (excluding convertible bonds and exchangeable bonds) was 3.74%, a decrease of 66 bps from the level of 2019.

Dealers Association

Cao Yuanyuan announced that since the beginning of this year, the Association of Dealers has given full play to the advantages of the interbank bond market to provide strong support for the financing of market entities. 

At present, a total of 235 companies have issued 293 epidemic prevention and control bonds for a total amount of more than 200 billion yuan. They covers 21 industries in 29 provinces. 

They also introduced mechanisms for asset-backed notes (ABN), merger notes, and private enterprise bond financing support tools, and launched asset-backed commercial paper (ABCP) to actively guide enterprises to raise funds through these innovative tools. From January to August, the cumulative amount of debt financing instruments issued was 6.07 trillion yuan, a year-on-year increase of 39.6%.

2020 also saw the establishment of a breach of contract handling system and more strengthening of self-discipline management. Under the guidance of the PBoC, a guide to default and risk disposal of debt financing instruments was issued, and a “toolbox” for default disposal was established to help investors adopt diversified risk disposal methods on the basis of fully strengthening information disclosure and investor protection. A bond trustee system has also been established.

Since the beginning of the year, the Association of Dealers has imposed self-discipline sanctions on people 33 times. For suspected violations of the Securities Law, under the unified enforcement mechanism, it actively transferred cases to the Securities Regulatory Commission. Currently, the interbank market cross-market unified enforcement is rated as being of “the first order”.

Chris Gill

With over 30 years reporting on China, Gill offers a daily digest of what is happening in the PRC.

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