China says firms issuing debt cannot accept guarantees from local governments

Source:Reuters-Global Times Published: 2018/2/12 21:38:39

China says companies issuing debt cannot accept guarantees from local governments


Chinese companies issuing bonds must not request or accept any type of guarantees from local governments for debt financing, the nation's top State planner said on Monday, in a notice detailing new rules for corporate bond issuance.

The new rules are the latest in a series of tough measures taken by China to reduce systemic risks in the world's second-largest economy.

Bond issuers must publicly state that debt raised does not add to local government debt and that they are not serving any government financing functions, said the notice from the National Development and Reform Commission. Chinese authorities are working to separate local governments from the financing activities of often closely associated but technically independent companies.

The central government says it will not be responsible for debt raised by these firms but it is still widely assumed that the government would step in to provide support in the event that these firms faced repayment issues.

China's outstanding local government debt rose 7.5 percent year-on-year to 16.47 trillion yuan ($2.56 trillion) at the end of 2017, according to Reuters calculations, but remained within the government's target.


Newspaper headline: China says companies issuing debt cannot accept guarantees from local governments


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