the formal start of chinese corporate debt issuance

The Trial Measure for the Issuance of Corporate Bonds
On August 2007, the China Securities Regulatory Commission
implemented a Measure for the Issuance of Corporate Bonds
terms on a number of points including:
issuance mode, issuance conditions, issuance procedures, supervision and
protecting bondholder rights and interests.
The Trial Measure's more innovative provisions include: removing the
requirement that issuers must provide a guarantee; removing the
requirement that financing capital be used for fixed asset investment
projects; allowing the price of corporate bonds to be fixed by the issuers
and the sponsors through a "Request for Quotation"; and allowing listed
companies to apply for approval of a phased issue.
The Trial Measure also imposes requirements on firms seeking to issue
corporate bonds. First, the firm's average annual profit in the last
three fiscal years cannot be less than the annual interest owed on the
bond issue; Second, after the issuance, the issuer's cumulative balance
of outstanding corporate bonds should not exceed 40% of its recent net
asset value; finally, financial firms should use methods relevant to the
financial industry to calculate the cumulative balance of their
outstanding corporate bonds.
The Trial Measure also provides special protections for bondholders
including: requiring the issuer to disclose relevant information
completely, timely and fairly; utilizing trustees to guard bondholder
interests; and requiring an issuer to convene a bondholder meeting when
situations arise that may affect important bondholder rights.
The Trial Measure is a very significant step. Among other benefits, its
provisions are expected to promote the development of China's overall
bond market, broaden channels of enterprise financing, enhance the level
of domestic direct financing activity and foster the evolution of a multi-level capital market.