China keeps its foot on the bond pedal

Agencies

China's top economic planner yesterday pledged to support high-quality companies borrowing foreign debts as local government financing vehicles of the country issued a record amount of offshore bonds.

The National Development and Reform Commission, the state planner, said in a statement that high-quality companies should occupy a prominent position in an industry, have good credit and play a leading role in promoting the "high-quality" development of the real economy.

The NDRC would also guide companies to use the foreign debts to facilitate the implementation of major national strategies and build a modern industrial system for the country, the statement said.

This came as China's LGFVs, viewed as one of the biggest risks in the nation's debt markets, found some respite in the offshore bond sector amid investor confidence bolstered by government efforts to ease repayment pressure.

LGFVs have issued a record amount of offshore bonds - including dollar bonds, offshore yuan bonds and those issued in other currencies - so far this year, with sales climbing to US$24.1 billion (HK$188 billion) as of July 22, the highest level since Bloomberg began compiling the data in 2013 and up 79 percent from the same period a year earlier.

Also, China's top companies have raised a record US$14 billion in offshore convertible bonds so far this year as they diversify future funding needs while interest rates stay high.

Offshore convertible bonds from the mainland accounted for 22 percent of global deals, LSEG data showed, after Alibaba (9988) raised US$5 billion in May and Ping An Insurance (2318) finalized a US$3.5 billion transaction last week.

The amount raised so far this year from China is up 1,588 percent on the same period in 2023, the data showed, when just US$829.3 million was raised in convertible bonds.

Separately, the Securities Times said yesterday China's central bank's decision to lower the collateral requirement for medium-term loans will alleviate the "asset famine" pressure on the bond market, citing a source.

The People's Bank of China said on Monday it would lower the collateral requirement for the medium-term lending facility (MLF) loan to increase the size of tradable bonds in the market.