MNI INTERVIEW: PBOC To Spur Tech Firm Bond Issuance
MNI (BEIJING) - A new bond platform for Chinese tech companies is likely to boost issuance only modestly at first, but will grow over time, and aligns with People’s Bank of China objectives for building a multi-tiered market for debt securities and supporting key sectors, a senior government advisor told MNI.
The new platform will permit issuance by banks, securities firms and investment companies to fund loans to tech startups, as well as by private equity and by bigger tech firms borrowing directly for themselves. It will provide a key alternative source of finance for a sector now relying heavily on bank loans funded by deposits, Yang Chengzhang, member of the CPPCC National Committee, China’s top advisory body, said in an interview.
PBOC Governor Pan Gongsheng announced the platform’s creation last Thursday, as well as the expansion of a tech sector re-lending program to CNY1 trillion from CNY500 billion. Outstanding loans for tech-focused small and medium-sized enterprises reached CNY 3.27 trillion as of the end of 2024, up 21.2% year-on-year, a rate of growth 14 percentage points higher than for overall bank loans.
While authorities are particularly targeting support for the tech sector as rivalry with the U.S. intensifies, the PBOC has also recently announced relending and swap facilities for the broader equity market, and the annual Two Sessions policy-making meeting saw the stability of stock and real estate prices added to its policy mandate. (SeeMNI: PBOC To Buoy Assets, As Stocks, Property Added To Mandate)
CENTRAL BANK SUPPORT
Banks and securities firms will now be able to turn to the central bank for support if liquidity dries up during market downturns, said Yang, also chief economist of Shenwan Hongyuan Securities.
The property market, whose performance is closely connected to that of equities, presents the greatest potential risk to China’s economy, but official support means its most challenging days have now passed, with less pain inflicted on financial institutions than initially feared, he said. （See MNI: China Tier-one Housing Markets Likely To Stabilise）
Investors interpreted the recent Government Work Report’s call to “establish a market stabilisation mechanism” as a sign of plans for a national equity stabilisation fund worth over CNY1 trillion, but Yang said that regulators were more likely to restructure and make better use of existing state-owned investment institutions, with significant resources, rather than set up a new fund.
Domestic institutions are now likely to increase equity investments, given declining bond yields in bonds and falling house prices, he said.