Encouraged by the shift in approval process, China's corporate bond market on local currency basis grew 90.9 percent from a year earlier in the first half of 2009, a report released by the Asian Development Bank (ADB) said Tuesday.
At the end of June, the amount of the outstanding corporate local currency bonds reached $355 billion, the Asia Bond Monitor said.
With the exception of commercial paper and asset-backed securities, the outstanding amount of corporate bonds across key sectors in June 2009 significantly outstripped their levels in December 2008, the report said, adding that the rise in the amount of outstanding medium-term notes (MTNs), local corporate bonds, and commercial bank bonds in June 2009 as compared to end-2008 levels is particularly noteworthy.
Total issuance of MTNs in the first half of 2009 reached 435.70 billion yuan (about $64 billion), or 251 percent of the full-year total for 2008, the report said.
ADB said one apparent reason for this shift is that the approval process for the MTN window, regulated by the National Association of Financial Market Institutional Investors (NAFMII), is much quicker, and can often be completed in 1-2 months.
Combined the Treasury notes and corporate bonds, the amount of China's outstanding local currency bonds stood at 15.77 trillion yuan (about $2.32 trillion), up 5.3 percent from the previous quarter that ends in March and 14.8 percent higher compared with the same period last year.
Measures to stimulate the country's economy are taking hold as China's gross domestic product (GDP) expanded 7.1 percent in the first half of 2009, the report said, the combination of historically low policy rates, declining inflation, and domestic liquidity in the first half resulted in heightened demand for bonds, particularly short-dated instruments.
Over the developing Asia bloc, corporate bonds have notably become a main drive of the market in the first six months this year as the recovery kicks in, the report said.