(Yicai) June 25 -- Five Chinese private equity investment firms have recently issued a combined CNY1.3 billion (USD 186 million) in tech innovation bonds, supported by credit enhancement and investment from newly launched risk-sharing mechanisms. This marks the first time that private venture capital companies in China have successfully issued bonds of this kind.

The five firms are Addor Capital, Jinyu Maowu Investment Management, Junlian Capital Management, Zhongke Chuangxing Technology Investment and Shenzhen Oriental Fortune Capital Investment Management, according to the National Association of Financial Market Institutional Investors.

These tech innovation bonds feature terms of up to 10 years, much longer than the three- and five-year terms of standard medium-term notes, as well as significantly low interest rates, even lower than comparable bonds issued by state-owned enterprises during the same period.

CSET Fund released CNY400 million (USD55.2 million) of tech bonds with a coupon rate of 2.1 percent and a term of five years, extendable for another five years. Yida Capital issued CNY150 million worth with a yield of 2.33 percent and a term of three years plus an additional two years.

Oriental Fortune's bonds stood out for having both the lowest interest rate at under 2 percent and the longest maturity. The Shenzhen-based firm issued CNY400 million (USD55.2 million) worth with a coupon rate as low as 1.85 percent and a term of five years with extensions of three years followed by another two years.

Oriental Fortune’s rate of 1.85 percent sets a new record for private corporate bonds, industry insiders said. While CSET Fund’s 2.1 percent rate and Yida Capital’s 2.33 percent match those of similar bonds issued by top state-owned investment institutions. This is a clear sign that there is strong policy support for the venture capital sector.

The People’s Bank of China has rolled out a risk-sharing mechanism for tech innovation bonds, Governor Pan Gongsheng said on May 7. The central bank will provide low-cost refinancing to purchase these bonds and will collaborate with local governments and market-based credit enhancement agencies to help cover potential default losses through diversified measures like joint guarantees.

Future developments of this policy tool could include innovative instruments linking equity and debt, and bonds with special clauses such as convertibility or maturity extensions, said Ming Ming, chief economist at CITIC Securities. This will help better balance companies’ short-term debt pressures with investors’ expectations on returns.

Editor: Kim Taylor