BEIJING, Aug 14: China’s securities regulator gave long-awaited approval on Tuesday for listed firms to issue corporate bonds on a trial basis, a milestone for the country’s budding bond market.

The China Securities Regulatory Commission (CSRC) said in a series of statements published on its website that companies listed in Shanghai, Shenzhen or overseas could apply to sell corporate bonds with maturity of more than one year.

The CSRC said the move would offer more choice to Chinese investors amid growing demand for fixed-income products.

“Institutional investors such as mutual funds, insurers, commercial banks and social pension funds have an urgent need for corporate bonds,” it said.

Issuers do not need bank guarantees and can use funds raised for any general corporate purpose that is approved by their board, including repaying bank loans or improving financial structure, it said.

Under the old rule, the National Development and Reform Commission, the top government planning body, was the only body that could approve such bond issues with maturity above one year.

But tough restrictions, including a requirement for bank guarantees, made it difficult for companies to issue bonds. And companies can only use the funds for designated fixed-asset investment projects.

The People’s Bank of China, the central bank, took advantage of the system by opening a corporate bill market in May 2005 for debt of one year or less.

After the new rule takes effect, the government planning body will still be in charge of approving issuance of bonds of more than one year by non-listed firms.

The planning commission gave its approval in March for 95 firms to issue a record 99.2 billion yuan ($13bn) in bonds in 2007, up from 60.8 billion yuan in 2006.

But these figures were still dwarfed by the 165 billion yuan raised through domestic initial public equity offerings and paled in comparison with the 3.18 trillion yuan in new Chinese bank loans in 2006, almost all of which went to corporations.—Reuters