Pol­icy moves to re­duce fund­ing risks

China Daily - - BUSINESS -

The cen­tral bank has an­nounced fi­nan­cial poli­cies de­signed to sup­port pri­vate com­pa­nies this week, cov­er­ing ar­eas such as bank loans, cor­po­rate bonds and eq­uity fi­nanc­ing.

The Peo­ple’s Bank of China will pro­mote the launch of a spe­cially de­signed fi­nan­cial in­stru­ment to se­cure pri­vate firms’ bond is­suance, to guard against cor­po­rate bond de­fault risks, of­fi­cials from the cen­tral bank’s op­er­a­tions of­fice said at a meet­ing on Fri­day.

Ac­cord­ing to an ear­lier in­ter­view with the cen­tral bank’s gover­nor, Yi Gang, an ini­tia­tive to pro­mote pri­vate firms’ bond is­suance has al­ready launched. Three com­pa­nies have al­ready raised 1.9 bil­lion yuan ($273.51 mil­lion) via over-sub­scribed bonds, and ad­di­tion­ally 30 pri­vate en­ter­prises are pre­par­ing to is­sue bonds, he said.

The cen­tral bank will also pro­mote eq­uity fi­nanc­ing for pri­vate firms, work­ing with var­i­ous fi­nan­cial in­sti­tu­tions, in­clud­ing fund man­age­ment com­pa­nies and bro­ker­ages. The mea­sure is ex­pected to re­duce risks re­lated to pri­vate firms se­cur­ing fi­nanc­ing by pledg­ing shares as col­lat­eral, ac­cord­ing to the meet­ing.

Mon­e­tary pol­icy could be fur­ther eased in the fu­ture, as tight­en­ing credit con­di­tions have con­trib­uted to pri­vate en­ter­prises’ fi­nanc­ing dif­fi­cul­ties, an­a­lysts said.

The mon­e­tary au­thor­ity is likely to in­crease the sup­ply of long-term and rea­son­ably priced fund­ing for fi­nan­cial in­sti­tu­tions, and fur­ther cuts of the re­serve re­quire­ment ra­tio would fit this goal, Gold­man Sachs said in a re­search note.

“We ex­pect more such of­fi­cial com­ments in the com­ing weeks with re­gard to sup­port for pri­vate en­ter­prises, which may help to im­prove mar­ket sen­ti­ment, es­pe­cially among do­mes­tic in­vestors who have been par­tic­u­larly bear­ish,” it said.

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