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China’s major state-owned banks including Industrial and Commercial Bank of China (HK:1398) (SS:601398) and China Construction Bank (HK:0939) (SS:601939) have set up AICs to conduct debt-to-equity swaps in the past two years, as the country aims to cut leverage especially in state-owned entities and shift risks from banks.
Such AICs can now set up investment plans in market-oriented debt-to-equity assets including convertible bonds, debt-to-equity special bonds, ordinary shares, preferred shares and debt-to-preferred shares, China Banking and Insurance Regulatory Commission (CBIRC) said in a notice on Tuesday.
AICs can raise fund through private fundraising from qualified investors include families with at least 5 million yuan ($705,000) in net asset or individuals with annual income no less than 600,000 yuan in the past three years, CBIRC said. Insurance fund and pension fund can also invest in such debt-to-equity investment plans through AICs, it added.
The move comes as China has been taking a series of measures to expand direct financing via capital markets. Policymakers are carefully balancing the need for liquidity to revive the economy hobbled by the coronavirus pandemic and risks of higher inflation and improving leverage.
Beijing also announced plans last Thursday to create a public market for real estate investment trusts (REITs), aiming to channel personal savings and private capital into infrastructure projects without overstretching already debt-laden local government.
