China eases bond issuance rules for top rated firms in bid to boost economy amid trade war with United States

National Development and Reform Commission guidelines trigger rally, with property developers and local government financing vehicles expected to benefit

But smaller and weaker private sector firms miss out on easier financing and are set to come under additional pressure from maturing debt in next two years

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Property developers and local government financing vehicles are expected to benefit most from the changes. Photo: AFP

Published: 3:10pm, 19 Dec 2018Updated: 5:27pm, 19 Dec 2018

China’s economic planner has relaxed rules for top rated firms seeking to raise funds in the domestic bond market, a move that alleviates refinancing concerns for property developers and local government financing vehicles.

The guidelines from the powerful National Development and Reform Commission (NDRC) are the latest measures to support the development of China’s bond markets as authorities aim to wean companies off relying exclusively on bank lending, while also easing funding conditions for private firms.

The NDRC announced last week explicit financial criteria for top-credit rated firms to be able to raise funds in the bond market.

The firms should have a debt ratio of less than 85 per cent and not have defaulted on loans in the last three years.

The NDRC issued requirements on an industry by industry basis, with separate rules for areas including property, manufacturing, cement, hotel and catering.

The National Development and Reform Commission and National Energy Administration building in Beijing. Photo: Dickson Lee

For property or construction firms, for example, the minimum size of assets needed to issue bonds is 150 billion yuan (US$21.74 billion) with a minimum annual revenue of at least 30 billion yuan (US$4.35 billion).

In the past, the NDRC has regulated the bond market for China’s state-owned enterprises, while the People's Bank of China (PBOC) has controlled non-financial enterprises debt instruments and the China Securities Regulatory Commission has regulated bonds traded on China’s stock exchanges.

But the three ministerial bodies are now vying to reshape the country’s fragmented corporate bond market, with the NDRC's latest rules showing that property developers are also covered by its jurisdiction.