China to Introduce New Restrictions to Curb Companies' Local and Foreign Debt Risks
Xu Wei
/SOURCE : Yicai
China to Introduce New Restrictions to Curb Companies' Local and Foreign Debt Risks

(Yicai Global) May 17 -- China will impose new restrictions on companies to effectively prevent medium- and long-term local and foreign debt risks, China's National Development and Reform Commission, NDRC, said on its website today, citing a joint circular with the ministry of finance.

Companies who try to raise medium- and long-term foreign debt should achieve profitable operations, implement market-based financing in accordance with the law, and fully demonstrate the necessity, feasibility and financial sustainability of the issuance of foreign debt, said China's top macroeconomic planner.

They should also establish principal and interest repayment plan for foreign debt, as well as implement debt repayment guarantee measures. Such companies cannot ask for or accept guarantees from local governments and their departments for financing activities, and they should act with distinct responsibilities, make prudent decisions and take risks at their own expense, it added.

The move comes at a time when the central government has stepped up efforts to ward off financial risks and deepen reform and opening.

China's financial regulators will provide more support to large-scale enterprises with strong economic structure, high international operation standards and sound risk control mechanisms for overseas market financing, with the key task of supply-side economic reform in mind.

The proceeds should be used to support innovative and green development, strategic emerging industries, high-end equipment manufacturing, the Belt and Road construction and international capacity cooperation, it said.

Firms that have invested foreign debt in investment projects must establish a market-based investment return mechanism to form stable and sustained revenues, the NDRC added.

Editor: Mevlut Katik

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Keywords: NDRC , MOF , Local Debt , Risk , Foreign Financing