China onshore guarantee must be tested

Author: Ashley Lee | Published: 10 Nov 2014

China now permits onshore guarantees for bonds intended to expand issuers’ offshore operations. But market participants will remain cautious until it’s clear those guarantees are not structurally subordinated.

Before the State Administration of Foreign Exchange (Safe) released its guidelines in May this year, bonds issued offshore by Chinese entities did not have guarantees unless the issuer received a National Development and Reform Commission (NDRC) quota.

Typically Chinese companies have issued bonds from offshore holding companies...