ADB to fuel enterprise with yuan bond issue

PUBLISHED : Saturday, 12 June, 2004, 12:00am
UPDATED : Saturday, 12 June, 2004, 12:00am

Bank hopes yuan fund will boost securities market and stimulate private sector

The Asian Development Bank plans to raise 1 billion yuan in bonds to stimulate private-sector growth in China, ADB officials said yesterday.

Bank officials are still discussing details with the Ministry of Finance, and the bond issue - pending approval by the ministry - could take place as early as the end of this year or beginning next year. 'This would be a first time for the ADB in issuing yuan-denominated bonds in China,' said Bruce Murray, ADB's chief representative in Beijing.

'It also would be the first for any multilateral organisation in China. The idea is to not only foster private-sector growth, but also to develop the bond market in China.'

China's bustling private enterprises, which economists estimate make up anywhere between one-third to a half of the economy, still have a difficult time competing against state firms, especially in getting access to bank loans.

The ADB, which has been working with the government to come up with laws to protect private enterprises, plans to lend the proceeds to domestic or foreign private investors. The money could be used for various projects, including building infrastructure and setting up factories.

The ADB already has a US dollar portfolio of private-sector loans and equity exceeding US$230 million in China. Most of the money has been ploughed into provincial banks and power-generating companies with private shareholders.

'ADB's private-sector funds will increase substantially in China,' said Mr Murray. 'China has reached a point where the private sector is getting only larger. The political discrimination is being phased out.'

In the past few years, the ADB has helped draft a series of laws to protect the private economy. Chief among them is the China Securities Law, which gave enforcement powers to the China Securities and Regulatory Commission in 1999.

The ADB also helped draft an administrative licensing law which reduced the amount of bureaucratic approval necessary for private-sector development, and a government procurement law that required competitive bidding for government contracts.

The ADB is working with officials on drafting amendments that would strengthen China's companies and bankruptcy laws. Also on the bank's agenda is drafting laws to regulate competition and monopolies.

'China has done an extraordinary amount for private-sector development in Asia,' said Robert Bestani, director general of private-sector finance with the ADB in Manila. 'I first came to Beijing in 1986 and it's a different planet today. Why? Because the government adopted market economics and private-sector development as a long-term strategy.

'We at the ADB want to push that process further along.'