How to secure low-cost financing on the domestic bond market

In the current financial regulatory environment in China, securing finance at the lowest cost is crucial to the existence and development of Chinese companies. In addition to traditional means, such as bank loans, Chinese companies can, under the current legal framework, opt for debt financing on the domestic bond market.

Q: What means of financing on the domestic bond market are available to Chinese enterprises?

A: China does not have a unified bond market and, depending on the regulator, the principal means of financing on the domestic bond market are as follows: (1) enterprise bonds issued with the approval of the national or local development and reform commissions; (2) corporate bonds or small and medium-sized enterprise (SME) private bonds issued following the approval of, or recordal with, the China Securities Regulatory Commission (CSRC) and stock exchange; (3) non-financial enterprise debt financing instruments registered by, and issued through, the National Association of Financial Market Institutional Investors; and (4) wealth management direct financing instruments registered by, and issued through, the China Banking Regulatory Commission (CBRC).

Q: What are the differences between the enterprise bonds of the reform and development authorities and the corporate bonds of the CSRC?

A: The principal basis for the approval of enterprise bonds by the reform and development commissions is the Administrative Regulations for Enterprise Bonds (order No. 121 of the State Council). Pursuant to those regulations, an enterprise in China with legal personality may apply to offer enterprise bonds, provided that it satisfies certain conditions. In practice, the development and reform authorities have issued some specific guiding opinions based on state industrial policy.