CHINA is easing bond market rules as it tries to channel money to cash-strapped companies amid the slowest economic growth in a quarter century, sources with knowledge of the matter said.

    The National Development and Reform Commission (NDRC), one of the regulators for the nation’s corporate bonds, is taking the step as it moves toward a system to allow more firms to simply register to issue notes instead of getting individual approvals as they must now, the sources said. Issuers or bonds with AAA credit ratings will be exempted from the regulator’s review process, the sources said.

    “The new rules will make it easier for corporations to raise money and lower their funding costs, which is positive for the cash-strapped companies” said Liu Dongliang, a senior analyst at China Merchants Bank Co. in Shenzhen.

    “At the same time, relaxing the bond approval process means allowing more issuers into the bond capital market, including those with lower credit quality, which could be a potential risk,” Liu said.

    Under the new rules, bonds with guarantee companies that have ratings of AA+ and above, and notes rated AA+ and higher with collateral, may also be exempted from the NDRC’s review process, the people said. All companies whose securities are regulated by the NDRC will be allowed to use note proceeds to finance projects from the start and will be permitted to use as much as 40 percent of proceeds for operations. Previously only higher-rated companies could use up to that amount for unspecified purposes.

    The NDRC has distributed a document on the rules to all provincial development and reform commissions, the sources said. The 21st Century Business Herald newspaper reported earlier that regulators issued documents to request improvements in corporate bond application, disclosure, use of proceeds and supervision. (SD-Agencies)