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China's Central Bank Pushes New Channels in Debt Financing
Summary:

From News, page 3, issue 410
Translated by Tang Tang
Original article: [Chinese]

Against the backdrop of a four-trillion yuan stimulus package, the expansion of China's debt market has become a foregone conclusion.

The EO learned that at a recent conference with Chinese institutional investors, China's central bank announced that in 2009 it would expand the scope of debt issuance in China and stoke the coals of innovation in debt and financing instruments.

The EO learned of five products already being actively developed--private equity convertibles, small-medium enterprise aggregate liabilities, bonds for mergers and acquisitions, and US-dollar-denominated bonds.

Analysts said these five instruments offered more choices for enterprises, but technically speaking, US-dollar-denominated liabilities were more easy to operate.

"Currently, several securities firms have taken the lead in researching the five kinds of financial instruments. They plan to hand in feasability reports to the National Association of Financial Market Institutional Investors (NAMFII) by the end of the first half of 2009" one source familiar with the matter and who wishes to remain anonymous said.

The EO learned that NAFMII would be in charge of the design, issuance, as well as management of the products, and that they would be issued gradually as pilot projects first.

The source also said that of the two to three products that will come out this year, their market scope would be somewhere between 800 billion and 1,000 billion. The person also said, there would be breaking-through development in the issuing threshold.

NAFMII had started to prepare for researching these products as early as September. A source from NAFMII told the EO that from a more macro perspective, these products would help widen financing channels for businesses.

In October of last year, China's State Council issued a statement requiring that China "widen its debt issuance and actively develop corporate debt, short-term, and mid-term financing instruments.

Late last year, when Chinese policymakers weaved the four trillion yuan stimulus package, they left 1.18 trillion yuan to be covered by the central government, with the remainder to be financed through other channels.

"Apart from the 200 billion yuan in bonds that the central government issued on behalf of local governments, other options such as mid-term papers, short-term financing papers, and the recently-approved corporate debt have become new financing choices for businesses," the source from NAMFII told the EO.

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