China junk bonds pilot scheme will have limited impact

Author: | Published: 24 May 2012
China will allow small to medium enterprises (SMEs) to sell junk bonds under a pilot scheme which aims to broaden the range of financing for businesses struggling for funds. But market participants expect the move to have a limited impact.

In an online statement released this week, the Shenzhen Stock Exchange (SSE) said bonds could be issued from June through private placements to qualified investors. Bonds must have maturities of one year or longer and the coupon should not exceed three times the central bank’s benchmark interest rate, the SSE said. Property and finance companies are to be excluded from the scheme, and no more than 200 investors are allowed to take part in any placement.

China already...