Corporate Bond Issuance in China Expected to Make a Comeback

Refinancing needs and plans for infrastructure spending will contribute to the recovery of bond issuance by Chinese corporates through the rest of this year, though market conditions will remain tighter than last year and some companies will face restrictions, Fitch Ratings said in a recent report.

A tightening in the bond market in late 2016 made issuance less attractive, with renminbi bonds by Chinese nonfinancial corporates falling by about two-thirds in the period from December to February, compared with the previous year. Tighter rules on some companies, introduced by authorities to address overcapacity and contain risks from leverage, were also a check on issuance. Fitch does not expect a further tightening of conditions. Highly rated firms are likely to turn back to the bond market rather than going to banks for their borrowing.

Refinancing needs among corporates is high, with bonds worth CHY4.3 trillion maturing in 2017, which is about half of the total issued in 2016. Debt financing will be required for expected infrastructure fixed-asset investment, Fitch said.

– Adam Fusco, associate editor

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