China ready for SME private placement bonds

China has established the basic institutional framework for the launch of private placement bonds for small and medium enterprises (SMEs), according to comments made on Thursday.

An official with China Securities Regulatory Commission (CSRC) said the move aims to ease credit restraint for China's SMEs and find more ways for them to raise funds. This will meet the market demand of high-yield bonds, but such bonds will not be the only type issued.

Regulatory permits will not be required for issuing the bonds, but the placement agents should file relevant materials to stock exchanges to keep a record, said the official, who did not give their name.

But the filing does not mean any guarantee or judgement for the investment value or credit risk of the bonds, the official said.

The SME private placement bonds will not be immediately launched nationwide, as the CSRC is considering running a few trial programs in regions with more SMEs.

The bourses will enhance monitoring and cooperation with local governments to keep the market just, fair and open, said the official.

In another move to improve financial services for SMEs, the CSRC will also put more efforts into the construction of the over-the-counter (OTC) market, or the "new third board," as one of the priorities for this year, according to the source.

The CSRC will prepare for a national OTC market under unified regulation and expand the service to all innovative and growth SMEs that are not yet able to go public, the official said.

The "new third board" is an important platform for non-listed corporations to gain direct financing through a share transfer system, which was originally designed for enterprises in the Zhongguangcun Science Park in Beijing.