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MNI POLICY: China Boosts Tools to Help Companies Raise Capital

Chinese regulators have given companies wider channels for selling bonds and equities and courting foreign investors to facilitate capital raising as part of the reform of the financial markets, officials told reporters Tuesday in a briefing at the People's Bank of China. Promotions of new tools, such as asset-backed medium-term notes and asset-backed commercial paper, resulted in 40% more capital totaling CNY6.07 trillion raised in the first eight months of 2020 compared with the same period last year, according to Cao Yuanyuan, the deputy secretary-general of National Association of Financial Market Institutional Investors.

Bonds issued by private companies in Jan-Aug jumped 64% to CNY350 billion, with increased facilities for dealing with debt default risks, Cao said. The Association also bolstered so-called Panda Bond issuance in the process of accelerating the economic opening-up, with CNY46.7 billion issued in the eight months of the year, up 64% y/y, Cao said. To date, 52 foreign institutions have issued CNY250 billion in Panda Bonds in 2020, she said.

Foreign institutions hold CNY2.8 trillion bonds in China's interbank market, 27% more than at the end of last year, and they purchased 8.7% of the total outstanding government bonds, said Cao, stressing foreign investors have become important market players. China has allowed international rating companies to operate and extended trading times in the interbank market to attract more foreign investors to Chinese corporate bonds, she said.

Securities regulators have also accelerated IPO approvals. In the first eight months of 2020, 227 companies were listed on Shanghai and Shenzhen stock exchanges, raising CNY307 billion in total, said Lu Dabiao, vice-director of the bond department at the China Securities Regulatory Commission. The CSRC also enhanced equity financing and corporate mergers and acquisitions, Lu said.

Local authorities have also increased cheap loans to help smaller companies, particularly with non-collateral credit loans, and encouraged lenders to issue perpetual bonds to recapitalize banks, said Yin Xingshan, the head of the PBOC's Hangzhou branch.

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