China to simplify SOE offshore financing process soon
The People’s Bank of China (PBOC) and related government bodies have already submitted a proposal to streamline “going out” procedures for Chinese firms to the State Council, a central bank official told Shenzhen-based Securities News. “In the future, restrictions on overseas investment and financing by Chinese SOEs will be eased, and firms won’t have to apply for permission to fundraise in foreign markets on a case by case basis,” said Guo Jianwei, a deputy director of the central bank’s renminbi policy department. “Firms will be able to freely choose whether to issue renminbi debt in Hong Kong or whichever off-shore market they choose,” he said referring to the Chinese yuan currency .
Mr Guo’s statement did not specify when the new policy might be approved by the State Council, China’s cabinet.
The statement by the central bank official follows a similar policy move in the Shanghai Free Trade Zone earlier in February.
Currently, foreign fundraising activity requires a cumbersome approval process which has raised costs for firms and made issuing short term offshore debt, in particular, difficult and costly.
Moreover, non-financial firms have only been permitted to issue yuan-denominated debt in Hong Kong. Financial firms are also allowed to issue renminbi debt in London, Singapore and Taiwan.
China is in the midst of a large-scale crackdown on off-balance sheet fundraising which, in combination with a slowing economy and rising concerns over corporate indebtedness, has pushed up borrowing costs over the past year.
Two interest rate cuts since November – the latest on Saturday – will likely help bring borrowing costs lower for some firms, but the Chinese government is eager to offset the crackdown on domestic shadow finance by easing access to capital markets, including those off-shore.
A sharply weaker yuan since late 2014 has also raised concerns over capital outflows, and easier access for Chinese firms to offshore markets is one way to counter this.
