Following a regulatory relaxation by the Chinese authorities, unlisted companies can issue bonds on public exchanges, an alternative funding route for high-risk borrowers, after the government clamped down on precarious “shadow banking.” In the third quarter, new corporate bond issuance rose to 914 bn yuan, equivalent to 29% of all new credit. The rise in debt is also being driven by rising interest rates. Beijing engineered the freeing up of the bond markets as a transparent alternative funding route, and the credit crunch that followed its clampdown on shadow banking guaranteed a high take-up. Some analysts worry that the regulatory changes may lead to a repeat of the recent boom-bust cycle.
Following a regulatory relaxation by the Chinese authorities, unlisted companies can issue bonds on public exchanges, an alternative funding route for high-risk borrowers, after the government clamped down on precarious “shadow banking.” In the third quarter, new corporate bond issuance rose to 914 bn yuan, equivalent to 29% of all new credit. The rise in debt is also being driven by rising interest rates. Some analysts worry that the regulatory changes may lead to a repeat of the recent boom-bust cycle.