BEIJING, Jan.3 (Xinhua) -- 2017 marks another peak year for Chinese enterprises issuing debts abroad. According to the statistics from Bloomberg, as of 2017, the USD-denominated debts issued by Chinese enterprises in the foreign markets increased by 70 percent year on year to approximately 180 billion U.S. dollars, hitting a record high, according to the Xinhua-run Economic Information Daily.
Insiders expected that overseas debt issues by Chinese enterprises will continue to stay at a high level and might reach 200 billion U.S. dollars in 2018.
There might be a link between the rapid growth of overseas bond offerings and the rise of financing costs in the domestic bond market, an insider said.
If the issuers gauge purely from the interest rate perspective, overseas bonds boast certain advantages in the medium and long term since the interest rates in domestic market are rising rapidly in the second half of the year, according to Xie Tong, director of China Debt Capital Market at JPMorgan.
In 2016, a lot of corporate issuers were worried about the rising cost of offshore financing due to the depreciation of the RMB, but the pressure has been eased in 2017 thanks to the stabilization of the exchange rates, said Zhong Wenquan, head of Great China Credit Research & Analysis at Moody's Investors Service.
Except the short-term cost, the fast growth in newly issued debts by Chinese enterprises is also related with the demands of Chinese enterprises themselves and the characteristics of overseas markets.
More and more Chinese enterprises start to run projects or conduct M&As abroad so they need funds and are motivated to raise funds in the overseas markets, according to Xie Tong.
With years of experiences, overseas debt issuance has grown into a mature channel for financing. “If you look at the list of Chinese enterprises that have issued bonds overseas, many of these names are new to you because this was their first time to do that,” said Xie.
Zhong expressed that in fact the overseas market is a good supplementation to the Chinese market. The investors in Chinese financial market are different from their counterparts in the overseas financial markets and their risk appetites are also different.
In terms of the types of Chinese enterprises who issued bonds abroad in 2017, centrally-administered state-owned enterprises (SOEs), as the traditional giants, are still dominating the overseas bond offering, and real estate companies and urban financing vehicles also play important roles.
According to data from Wind Info, real estate companies issued overall 74 bonds abroad this year with the actual volume of more than 36.658 billion U.S. dollars, hitting a record high. In November, real estate companies were scheduled to issue nine bonds with a total amount reaching 3.55 billion U.S. dollars, rebounding to the highest point since the second half of this year.
Xie introduced that the debts issued by Chinese enterprises accounted for 65 percent in Asian bond markets. She also estimated that the proportion would expand to 72 percent in 2018. “From the perspective of issuers, the benchmark interest rate environment in 2018 will still be favourable for debt issuers. The U.S. Federal Reserve is expected to further raise interest rates next year. Therefore, it will be more beneficial to issuers if they auction bonds as soon as possible,” she said.
Xie also added that after 2015, some Chinese real estate enterprises would chose to issue bonds in the domestic market which had preferential interest rates. In 2018, an equivalent of 35 billion U.S. dollars bonds issued by Chinese real estate enterprises in China is expected to come due. If those debt issuers meet financing difficulties in China due to market liquidity or cost constraints, the refinancing pressure will force bond issuers to focus on overseas market. Therefore, the real estate sector will remain a key component of Chinese corporate bond issuers that will offer bonds abroad.
In the meanwhile, urban financing vehicles were very active to issue bonds in the past four months. Zhong forecasted that this kind of “public finance issuers” will make more efforts to issue bonds abroad and emerge as a crucial force of bond issuing.
Zhong suggested that the massive infrastructure projects involved in the 13th Five-year Plan still have financing demands, and related enterprises will explore new financing channels abroad to raise money. In the past two or three years, Beijing Subway, Guangzhou Subway and Wuhan Subway all succeeded in their overseas bond issues, setting many good examples. (Edited by Yang Yifan, yangyifan@xinhua.org)
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