CHINA - China Construction Bank (CCB), the country's third-biggest lender, and China Development Bank (CDB) have been earmarked for a special pilot programme to sell a combined CNY15bn (US$1.81bn) of asset-backed securities in an effort to lift the stumbling mainland bond market.
CCB would sell CNY5bn of mortgage-backed bonds, and CDB, a policy bank that funds infrastructure projects, would offer CNY10bn of debt backed by other types of loans, said Tang Shuangning, a vice-chair-man of the China Banking Regulatory Commission.
Beijing has stepped up efforts to strengthen its bond market, which accounted for less than 1% of CNY836.9bn of financing by companies in the first quarter, according to central bank data.
In comparison, bank loans accounted for 70% of fixed-asset investment, and investors had bought shares in more than 1,400 listed companies with a total capitalisation in excess of CNY3trn.
China’s bond market is mostly made up of treasury and policy financial bonds, with corporate bonds coming in a distant third.
“Under these circumstances the domestic bond market cannot effectively distribute capital,” said a fund manager in Hong Kong.
“The move can improve the liquidity of banking assets, reduce financing costs and improve banks’ capital adequacy ratio,” Tang said in Beijing.
China last month let companies sell debt with maturity up to one year and is opening the market to overseas investors.
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