CCTV9英语新闻：Corporate bonds help companies raise development funds

China’s bank loans hit a record 2.51 trillion yuan in January and more than three-quarters of the proceeds went to companies. The development comes as worries about mounting corporate debt become a pressing issue. 

 

Companies now have three ways to raise money in China: a volatile stock market, loans from banks, and a developing corporate bond market. More than half of all this money is raised from banks, even though issuing bonds would cost the companies only half as much in interest payments. Ten years ago, the Shanghai International Port Group figured this out.

 

The central government is encouraging corporate bonds not only to help companies like Shanghai International Port Group, but also to help others suffering from serious overcapacity to improve their business futures. 

 

The companies suffering from overcapacity find it either hard to get bank loans, or wind up having to pay interest rates well above the benchmark. They are desperate to find money to sustain operations and pay employees while they try to find a way out in the vicious circle in which heavy debts erode profits, but poor profitability makes debts inevitable.

 

Experts believe corporate bonds can offer a way out. Although the interest rates for the bonds issued by companies with overcapacity problems might be higher than the central bank’s benchmark, still corporate bonds are a way for them to get investment, which could help them reduce overcapacity and improve their future prospects. That is why the government is increasingly encouraging companies to issue corporate bonds. 

 

Last year, the National Development and Reform Commission approved corporate bonds worth 716.6 trillion yuan, mostly for infrastructure construction and social services. Central bank governor Zhou Xiaochuan has said he wants to see the value of corporate bonds equal 100 percent of the country’s GDP by 2020.