By Wang Lan (China Daily)
Updated: 2007-12-03 10:46

Since the CSRC (China Securities Regulatory Commission) lifted restrictions in June, two enterprises have successfully issued bonds, raising a combined 5.2 billion yuan.

Corporate bonds from Yangtze Power were the first to come onto the market when the company raised 4 billion yuan in September by issuing 10-year bonds with a coupon rate of 5.35 percent a year.

In November, China Offshore Oil Engineering sold 1.2 billion yuan in bonds at a coupon rate of 5.77 percent a year mainly to institutional investors.

At least four more companies have applied to the CSRC for approval to issue bonds and many others show keen interest in doing so, says Yan Yan, general manager of China Chengxin Credit Management Co, a major credit rating agency.

Before, only large State-owned enterprises could issue bonds with the approval of National Development and Reform Commission.

The latest figures show Chinese companies still rely heavily on bank loans, which can be difficult to secure for medium- and small-sized enterprises.

Among the total financing capital in the first three quarters of 2007, bank loans accounted for 83.4 percent, down 2.6 percent from the year earlier period, followed by equity financing at 8.6 percent, up 5.7 percent, according to latest statistics compiled by the People's Bank of China.

But stock analysts say they expect the increase in the number and capitalization of initial public offerings (IPOs) to slow as the stock market slackens.

Without the enormous interest income from over-subscription, issuers may find the cost of IPOs is getting a bit steep, analysts say.

Experts say China's bond market's potential is far from being fully exploited, leaving plenty of room for future development. Adding to the allure is the plentiful supply of liquidity in the domestic capital market that is conducive to the issuance of corporate bonds.

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