(Yicai Global) July 31 -- China will explore setting up a special platform for high-yield bonds, which usually refers to a return of above 8 percent, that cater to the fundraising needs of small and medium-sized technology companies, as well as to those investors willing to take on more risk in return for higher yields, the deputy governor of the People’s Bank of China said.

The country’s financial regulators will also take measures to provide more resources and raise the profile of science and tech startups in the bond market, Zhang Qingsong said at a press briefing last week.

Tech startups often face challenges in getting the funding they need to develop due to the huge sums involved, the high risk and the lack of pledgeable assets. They also have a high threshold for bond issuance and in normal circumstances the bond market can only play a limited role in their direct financing.

The aim of PBOC’s proposal is to incubate a high-yield bond market, which will match the financing needs of small and medium tech firms with the greater risk appetite of investors on the hunt for better yields, Ming Ming, chief economist with Citic Securities, told Yicai Global.

In the beginning, the size of this market will be quite small, but it has great potential so long as a dynamic balance is established, Ming said.

China’s high-yield bond market has not been performing well, mainly due to the fact that investors tend to have the same mindset. Most investors are cautious about the level of risk, and prefer a lower yield without too much risk exposure.

Science and innovation notes are a type of debt financing tool used by Chinese tech firms. Some CNY226.4 billion (USD31.8 billion) worth had been issued as of the end of June, according to data from the PBOC. And science and tech startups had issued CNY225.8 billion worth of bonds.

Businesses in strategic sectors had raised CNY660 billion (USD92.7 billion) through bonds on the inter-bank market as of June 30, and the balance of debt issuance on stock exchanges was CNY464 billion.

Editors: Shi Yi, Kim Taylor