An alternative way to raise capital besides IPO
1. What is the alternative way for a company incorporated in mainland China to raise capital besides IPO?
On 8th June, 2007, Interim Measures of the Administration of the Insurance of Renminbi Bonds in Hongkong by Onshore Financial Institutions (《境内金融机构赴香港特别行政区发行人民币债券管理暂行办法》) was jointly published by People’s Bank of China and National Development and Reform Commission. Prior to 2010, only financial institutions including commercial banks incorporated in mainland China are allowed to issue Renminbi bonds in Hongkong to raise capital according to this public announcement. But on 16th September, 2010, the Interim Measures of the Administration of the Insurance of Renminbi Bonds by International Development Institutions (《国际开发机构人民币债券发行管理暂行办法》) was jointly issued by People’s Bank of China, National Development and Reform Commission and China Securities Regulatory Commission. The Rinminbi Bond Issuers were extended to include a particular type of international financial institution.
Now according to the Circular on the Matters relating to the Insurance of Renminbi Bonds in Hong Kong by Onshore Non-financial Institutions (《国家发展改革委关于境内非金融机构赴香港特别行政区发行人民币债券有关事项的通知》)published on 2nd May, 2012 by National Development and Reform Commission, non-financial institutions incorporated in mainland China are allowed to issue Renminbi Bonds in Hongkong to fund projects, enhance liquidity and improve working capital.
2. What kind of non-financial institutions are qualified as a Renminbi Bond Issuer?
According to the Circular, the non-financial institution shall:
I. have acceptable and complete management and administration system;
II. have satisfied credibility;
III. have strong profitability
IV. the fund raised from bonds shall be invested in fixed asset projects which complies with Chinese macroeconomic policies, industrial policies, foreign investment and outbound investment policies and fixed asset investment administration rules;
V. have no outstanding corporate bonds or other debt in default or no deferred payment of interest or principal; and
VI. have a three-year compliance track record, with no material violation of any laws or regulations.
In 2011, the People’s Bank of China and the Ministry of Commerce issued new rules which simplified remittance by issuers from Hongkong to mainland China.