The National Development and Reform Commission ("NDRC") has recently issued the Circular on Supporting the Direct Financing Sought by Outstanding Enterprises to Further Increase the Role of Corporate Bonds to Better Serve the Real Economy (the "Circular").
Firmly based on the main principle of letting the finance serve the real economy and in pursuit of deepening the reform of "streamlining administration, delegating powers and strengthening regulation, and improving services", which is oriented towards the market-based reform, in the examination and approval of issuing corporate bonds, the Circular highlights strict precautions against risks on the one hand, and, on the other hand, encourages excellent bond issuers to seek direct financing more independently and efficiently from the bond market. The Circular provides clarity in four aspects. The first is clearly defining the scope of outstanding enterprises that will be granted the support. The second is optimizing administrative means for bond issuance. The third is adopting the mode integrating "the negative list and the in-process and ex-post regulation". The fourth is setting out standard requirements for information disclosure for well-performing enterprises. Moreover, the Circular states that the validity of relevant approval documents will be extended by two more years; issuers will be allowed to design, in a flexible and independent manner, specific issuance schemes for bonds of each term; funds may be used more flexibly, as the ratio of supplementary working capital may be raised to up to 50 percent; and well-performing enterprises will be allowed to issue corporate bonds in a non-public way in accordance with applicable laws and regulations among institutional investors.