New issues: China urged to allow company ‘pandas’
By David Oakley
Published: November 16 2006 20:28 | Last updated: November 16 2006 20:28
China should open its doors further to foreign companies by allowing them to issue so-called panda bonds, the International Finance Corporation said on Thursday.
This would enable Beijing to deepen its undeveloped capital markets and encourage its already rapidly expanding economy to grow even faster.
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“They have opened the door a little bit,” Randall Riopelle, manager for manufacturing and services for the east Asia and Pacific region at the IFC, told local reporters.
“Now if they can open the door a little bit further to foreign corporates and other institutions, it would do tremendous good to the health of the Chinese capital markets.”
Pandas are Chinese currency bonds issued by foreign institutions – mainly government-backed organisations and international institutions – which need government clearance and a quota allocation before they can be issued.
The funds raised through panda bonds are only allowed to be used in certain government-approved sectors of the Chinese economy.
This month, the IFC, the private-sector arm of the World Bank, which has clearance to issue panda bonds, offered its second such bond, a Rmb870m issue. It lent the proceeds to four Chinese private companies. The IFC issued its first panda bond in October last year.
In spite of economic growth believed to be running at 10 per cent a year, China’s capital markets are undeveloped, restricting investment opportunities by forcing companies to rely heavily on bank loans to fund their operations.
Mr Riopelle said: “Our sense is that is there is huge appetite [for panda bonds]. A lot of banks, insurance companies and pension funds are sitting on lots of renminbi at the moment looking for places to invest.
“There is way more demand than supply for these products.” |
