China’s National Development and Reform Commission has revealed that it has green lighted the issuance of 220 billion yuan (approx. USD$33 billion) in corporate special bonds (企业专项债券) since the launch of the new securities in 2015.
Since 2015 NDRC has launched a total of 11 corporate special bonds for use with specific projects by enterprises, including urban parking lot bonds, urban underground piping bonds, strategic emerging industry bonds, aged care bonds, dual innovation incubation bonds, power grid upgrade bonds, market-based debt-equity swap bond, public-private partnership bonds, rural village industry integrated development bonds and social sector industry bonds.
At a recent press conference held by NDRC on the state of corporate special bonds, spokesperson Meng Wei (孟玮) said that the commission has already given its approval to over 220 billion yuan in these debt securities over the past two years, of which nearly 200 billion yuan have already been issued.
Taking just one category of corporate special bonds as an example, from November 2015 to the end of June this year NDRC approved a total of 27 dual innovation incubator corporate special bonds, raising 47 billion yuan in funds for a total of 29 different projects across eight Chinese provinces.
According to NDRC most of the funds raised were used for the construction of new infrastructure or the systems upgrades of industry parks, where over 4000 enterprises are housed and 227,000 staff employed.
According to Meng corporate special bonds are a “bespoke” form of bond product within the framework of China’s corporate debt system, and that the industries and areas they cover all suffer from disadvantages such as inadequate product supply or unsound market development, lending to strong demand for investment.
“The issuance of corporate bonds, the clearing out of financial channels, and the raising of long-term, low-cost capital helps to further attract investment from various entities, expediting the continued, healthy development of these sectors and industries,” said Meng.
“Innovations in special bond types further expands new channels for corporate bonds to service the real economy, and plays a positive role when it comes to expediting effective investment and compensating for shortcomings.”
