Chinese firms seek foreign funds

By Xie Jun Source:Global Times Published: 2018/6/4 22:33:39

More companies seen issuing bonds overseas


A women walks past a board advertising foreign currencies. File photo: IC



Chinese companies have been increasing efforts to raise funds by issuing bonds overseas, which experts said is an effective way to reduce their short-term debt ratio at a time when domestic financing channels are becoming restricted.

"It also shows that although some foreign voices express doubts about the Chinese economy, overseas investors are still betting on domestic economic growth with something real: their money," Zhang Ning, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Monday.

Data revealed in a Xinhua News Agency report in January showed that by the end of 2017, the US dollar-denominated debt issued by Chinese enterprises in overseas markets increased by 70 percent year-on-year to approximately $180 billion, a record high.

Real estate companies have been particularly active in this area. According to a report by chinanews.com, mainland real estate companies had issued 61 batches of bonds overseas from January 1 to May 22, worth a total of more than $24 billion, up 105 percent on a yearly basis.

The Xinhua report cited industrial insiders who predicted that overseas debt issued by domestic enterprises will remain high and might reach about $200 billion this year.

Debt pressure

According to Zhang, domestic companies are turning to offshore fund-raising channels in order to lower their short-term debt ratio.

"Particularly for real estate companies, we can see that their valuations on the Hong Kong stock exchange are relatively low compared with their cash flow. This is because the market is worried that potential housing price fluctuations might exert pressure on those companies with a high debt ratio," Zhang told the Global Times.

For example, top Chinese real estate developer China Vanke had an overall debt of 1.03 trillion yuan ($161 billion) by the end of March, with a debt ratio of about 84 percent, according to media reports. 

According to Zhang, Chinese companies' interest in overseas bond issuance has been kindled as domestic fund-raising is not as convenient as before. This is because tightened financial management has blocked many so-called "flexible" fund-raising channels like the refinancing services provided by trust companies for listed firms.

Xue Jianxiong, president of Shanghai-based asset management firm UTC, told the Global Times on Monday that real estate companies are "very short of money" nowadays. "If they can get money from overseas, they will get as much as possible," he said.

Feng Liguo, a research fellow with the research center at China Minsheng Bank, also told the Global Times on Monday that many domestic companies he has had contact with in recent years have expressed an eagerness to raise money overseas.

"Capital-raising costs are much lower in offshore markets. For example, in some countries like Japan, the interest on bond issuance is just 1 percent, compared with an interest rate on loans of about 10 percent for smaller companies in China," Feng said.

Zhang said that in the past, domestic companies were not that good at using overseas fund-raising channels or financial tools. "Now they not only have increased awareness, but also have stronger capability in terms of overseas business," he said.

He also noted that defaults are unlikely. "Particularly for asset-heavy companies like property firms, they can sell their assets in case of real cash trouble."

Posted in: ECONOMY,COMPANIES

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