China’s recent regulation to increase scrutiny on companies issuing offshore debt will become effective February 10. The regulation will cater to offshore debt with a maturity of over 1Y that are sold by Chinese firms or their controlled offshore entities. Currently, firms have only been asked to register offshore bond issuance plans with the NDRC. However, under the new regulation, they will be required to register, report and receive approval from the NDRC. Here, issuers will also have to regularly submit information including their use of fundraising proceeds to the NDRC and report major situations that may impact debt repayment. Besides, even defaulted Chinese companies might be able to apply for foreign debt sales. “The main purpose of the new rules is to limit local government financing vehicles’ excess borrowings offshore,” said Zhaopeng Xing, senior China strategist at ANZ Bank. He added that the rule could help developers that have defaulted on offshore debt, but whether they will be able to sell new bonds overseas would depend on market acceptance. The plan to step-up approvals via a regulation was proposed in August 2022.

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