PRC private fund managers have been driving investment in
PRC-issued offshore high yield bonds because they are not
subject to credit rating restrictions imposed by the China
Banking Regulatory Commission (CBRC).
A number of private wealth management firms are investing in
offshore debt issued by Chinese companies. Some of these bonds
are seen as risky as an increasing number of BB or even B-rated
issuers from the country are tapping the offshore dollar debt
But, as PRC-based counsel point out, private wealth
management firms are not qualified domestic institutional
investors (QDIIs), with some of them only regulated by the
China Securities Regulatory Commission (CSRC) or the Asset
Management Association of China. This means that they are not
among entities subject to the CBRC restrictions when it comes
to investing in foreign-issued debt.
"The rules generally require QDII-qualified commercial banks
and trust companies to invest in offshore bonds rated...