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

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

By Bloomberg News  Oct 24, 2013

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.

To contact Bloomberg News staff for this story: Steven Yang in Beijing at kyang74@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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