The Financial Market Department of the People's Bank of China ("PBC") has recently issued the Circular on Piloting the Flexible Issue of Financial Bonds Through Bidding (the "Circular"), immediately effective from the issue date.
The Circular provides that, at the initial stage of the pilot program, the flexible issue through bidding will merely apply to financial bonds of the development or policy nature, and the PBC's Financial Market Department will expand the coverage of the pilot program step by step, depending on situations of the pilot program. During the pilot period, the scale of a single issue of financial bonds may be adjusted by up to 50 percent of the initially-determined scale of bonds to be issued. Meanwhile, the Circular clearly specifies that, when the bidding for financial bonds triggers the flexible adjustment mechanism for issuing scale, the issuer shall make the adjustment in strict accordance with the previously disclosed rules. The adjusted scale shall not become effective until it has been confirmed by the issuer and the PBC's observer with their respective signatures, and relevant decision-making materials shall be kept properly. Moreover, the Circular requires that, financial bonds issued shall be priced at a reasonable level under the market-oriented principle, to fully reflect the distinctive risk returns of financial bonds, and that the pricing of financial bonds shall not be twisted through mutual holding or otherwise.