Listed companies, including those listed on the Shanghai, Shenzhen, or overseas markets, are now allowed to issue corporate bonds on a trial basis, according to a new rule released by the China Securities Regulatory Commission (CSRC) yesterday, the Shanghai Securities News reported today.

The rule signals the official start of China's corporate bond issuance and is important in expanding enterprises' financing channels, improving financial market, enriching securities investment tools, and boosting harmonious development of the capital market.

The CSRC said potential issuers must have sound credit ratings and their average annual distributable profits in the recent three accounting years must be equal to at least one year's interest that the company would pay on the proposed bond issue.

Furthermore, the value of outstanding bonds after the proposed issuance should not exceed 40 percent of the company's net assets at the end of the latest accounting year, according to the rule.

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The regulator is also planning to issue a series of auxiliary measures covering issuance applications, prospectuses, bondholders' meetings, and custody agreements.

Statistics from listed companies and sponsors show that three kinds of companies, public facilities such as electricity power and transportation, real estate developers, and high-performance small- and medium-sized companies, are more interested in corporate bond issuance.

China Yangtze Power Co is expected to issue the first corporate bonds with a total issuance of 8 billion yuan (US$1.06 billion).

Currently, only a handful of large State-owned enterprises approved by the National Development and Reform Commission (NDRC) can issue such bonds. The price and amount of bonds issued are to be decided by the commission, and the State commercial banks are also required to underwrite the bonds.

Just 283.1 billion yuan of corporate bonds had been issued by the end of last year, accounting for only 1.35 percent of gross domestic product, far lower than the 40 percent in the United States and 17 percent in the Republic of Korea.

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