NDRC Lets Firms Pay for Shantytown Work with Bonds

September 27, 2013 Leave a comment

09.26.2013 14:53

NDRC Lets Firms Pay for Shantytown Work with Bonds

Cabinet says companies can pay up to 70 percent of the costs for the renovations through debt financing

By staff reporter Yang Na

(Beijing) – The government’s top planning agency beefed up financing for companies involved in rebuilding shantytowns by allowing them to cover nearly three-quarters of the cost via bonds. Rebuilding shantytowns is a major part of the government’s urbanization plans. A notice published on the website of National Development and Reform Commission (NDRC) on September 25 said that companies involved in shantytown projects can issue corporate bonds.The notice encouraged local government-backed financing platforms and private companies to participate in these projects and said they can use various financing approaches, including direct investment, joint-stock, build-and-transfer and corporate bonds.

The agency promised that bond issuance designated for shantytowns will have an expedited review process. The NDRC allowed debt financing to cover up to 70 percent of the cost, and encouraged city and county governments to subsidize companies for their interest payments.

The policy is the latest measure in a campaign championed by the central government. Premier Li Keqiang emphasized shantytown rebuilding in the State Council regular meeting on June 26, and highlighted six supporting measures, including expanding financing channels.

In July, the country’s cabinet set a goal of finishing rebuilding areas involving 10 million households by 2017.

In August, the central bank allowed the China Development Bank (CDB) to make 100 billion yuan worth of soft loans for shantytown projects. Hu Huaibang, chairman of the CDB, said that month that the bank planned to issue loans of up to 100 billion yuan in the next five years to renovate shantytowns.

In July, the CDB underwrote a pilot corporate bond for a government-backed company in Yueyang, in the central province of Hunan, which was designated for renovating 11 shantytowns. The bond originally aimed to raise 1.8 billion yuan. With a maturity of seven years and a 6.05 percent interest rate, lower than other corporate bonds, the bond was oversubscribed and raised 3.6 billion yuan.

By September 23, a total of 17 shantytown-related bonds were issued, netting 18.6 billion yuan.

A report issued by Guotai Junan Securities estimated that 80 billion yuan worth of shantytown-related bonds will be issued in the next three months. City investment bonds issued by local government financing platforms for purposes including shantytown renovation and infrastructure building will be rolled out at a pace of 40 billion yuan to 50 billion yuan per month in the next few months, the report said.

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