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Chinese regulators move to tighten bond-sale supervision

Chinese authorities are tightening supervision of onshore and offshore bond sales following an increase in defaults in 2018, Caixin reported May 21.

The National Development and Reform Commission warned companies of harsher penalties if they continue to fail to register their offshore bond sales. The commission said noncompliant issuers will be added to an industry blacklist and have their offense recorded in the national credit information system. The commission is responsible for monitoring foreign bond sales.

For its part, the China Securities Regulatory Commission reminded department and exchanges that deal with bond sales to monitor and evaluate potential risks, a spokesman for the regulator said. The exchanges and departments must also conduct inspections and issue early warnings.

Bond defaults have increased 25% in China's domestic markets in the year to date, with 19 bond defaults with a combined value of 14.6 billion yuan, according to data provider Hithink RoyalFlush Information Network Co. Defaults became more common after policymakers cracked down on shadow banking and other funding channels, making it harder for companies to pay back their maturing loans.

New rules have curbed the use of private share placement by listed companies and new asset management rules have made it more difficult for companies to raise money from trust companies.

As of May 21, US$1 was equivalent to 6.38 Chinese yuan.