Shandong: Leveraging the Financing Function of Corporate Bonds to Support the Development of the Real Economy

In recent years, the application and issuance of corporate bonds in Shandong Province have been steadily carried out, with approval and issuance volumes ranking among the top in the country for consecutive years. In order to deepen our understanding of the latest policies and business knowledge of corporate bonds, accurately meet the financing needs of enterprises, further assist enterprises in expanding financing channels, reducing financing costs, and better serving the transformation of new and old driving forces and the development of the real economy in the province.

Lin Ping, Director of the Finance Department of the Provincial Development and Reform Commission, introduced that in recent years, the Shandong Provincial Development and Reform Commission has always adhered to the combination of the development of corporate bonds and the promotion of major strategies and plans throughout the province, continuously guiding and leveraging longer term and low-cost social funds to invest in key areas and key links of the national economy. As of the end of August 2019, the province has issued a total of 259 corporate bonds with a total scale of 251.48 billion yuan; 154 corporate bonds with a maturity of 119.098 billion yuan. Since the beginning of this year, the province has issued a total of 22 corporate bonds with a scale of 17 billion yuan, an increase of 8.32 billion yuan compared to the same period last year, which has effectively supported the construction of a large number of key areas and projects.

Some innovative bond varieties have also been successfully issued one after another, such as the underground pipe gallery bond of Weifang Binhai Investment, the green bond of Qingzhou City, the parking lot special bond of Weihai City, and the entrepreneurship bond of Zibo High tech Zone, etc., all of which have made successful explorations. Lin Ping said that while paying attention to the current achievements, it is also necessary to recognize that the problem of sluggish investment in the province is still prominent, and the insufficient supply of funds has hindered the expansion of investment. The construction of a number of major infrastructure projects urgently needs financial support. In the current stage of stabilizing and bottoming out the economic operation of the whole province, it is particularly necessary to break through the funding bottleneck and effectively leverage the financing function of corporate bonds.

Lin Ping suggested that for approved but not yet issued corporate bonds, issuers should actively cooperate with lead underwriters to raise bond funds through multiple channels and methods, actively carry out recommendation activities such as inquiries and roadshows to investors, and when necessary, local development and reform departments can gather approved but not yet issued bond issuing enterprises, organize bond raising and issuance recommendation meetings in the name of the government, invite investors to inspect enterprises and investment projects, enhance investors' understanding of local economic and social development and the operating status of bond issuing enterprises, deepen investors' analysis and judgment of the necessity, feasibility, and profitability of investment project construction, enhance investors' confidence, accelerate the landing of raised funds as soon as possible, and support project construction.

One major advantage of the development and reform departments managing corporate bonds is their understanding of planning, industries, and projects. Compared with other direct debt financing tools, they have obvious advantages in this regard. Lin Ping told reporters that in the next step, development and reform departments at all levels in Shandong should focus on the advantages and industrial characteristics of each region, and carefully sort out a number of major key projects in industries and fields encouraged by the state. "It is suggested that Caijinkou should take the initiative to connect with relevant departments, do a good job in financing planning while doing regional planning, consider financing innovation in advance when issuing industrial policies, and do a good job in selecting corporate bond investment projects while examining and approving major fixed assets investment projects." At the same time, attention should be paid to coordinated promotion in the work. Every bond issuance is a systematic project that involves multiple institutions such as securities firms, banks, rating agencies, auditors, legal institutions, and evaluators. Some bond types also involve multiple departments such as finance, land, and environmental protection. It is necessary to actively seek support from the city and county governments for bond work, coordinate relevant departments, help prospective bond issuing enterprises solve related difficulties, and quickly meet the requirements for bond issuance, thereby releasing potential bond financing needs.

In recent years, the National Development and Reform Commission has introduced a series of "tailor-made" innovative bond varieties to meet the needs of the real economy, and has issued 16 special bond guidelines to support the development of key areas such as urban parking lot construction, urban underground comprehensive pipe gallery construction, elderly care industry, entrepreneurship incubation, market-oriented bank debt to equity conversion, government and social capital cooperation (PPP) projects, social sector industries, and rural industry integration. Lin Ping believes that special bonds are actually bonds that summarize preferential policies related to a certain industry or field, and then consider them as priority for support. The country also includes special bonds in the category of accelerated review bonds. Therefore, for innovative varieties, the development and reform departments of each city and county should focus on research, actively promote and publicize them, such as underground pipe gallery bonds, social sector industry bonds, rural industry integration development bonds, and parking lot bonds, which are powerful financing tools for promoting local economic development.

Lin Ping emphasized at the end of the meeting that the risk of the corporate bond market is a key link and critical part of the overall bond market risk. Supervision and risk prevention during the existence of corporate bonds are the main responsibilities and duties of the financial work of the Development and Reform Commission. The National Development and Reform Commission, Provincial Party Committee, and Provincial Government attach great importance to this and have put forward clear work requirements. Next, the Finance Department of the Provincial Development and Reform Commission will strengthen the supervision of the existence period from four aspects: focusing on establishing a working mechanism, moving the risk threshold forward, assisting issuers in raising debt repayment funds through multiple channels, and understanding and mastering the requirements for corporate bond issuance and management. We will firmly hold the bottom line of preventing regional and systemic financial risks, and maintain a good financial and business environment in Shandong.

Information source: China Development Network

Editor He Yang of this website/Organizing