Chinese companies line up to sell 'innovation bonds', capitalising on Beijing's technology push

Chinese banks, brokerages and private equity firms are among companies kicking off plans on Thursday to sell so-called sci-tech innovation bonds.

Beijing published detailed rules on Wednesday for a "technology board" in the bond market to fund innovation amid intensifying Sino-U.S. rivalry.

Tech companies can already issue such bonds, but financial companies have become eligible under the new mechanism. China's central bank will provide low-cost funding to support bond sales, while local governments will help share losses in the event of defaults.


It represents China's latest effort towards technology self-sufficiency as Washington steps up curbs against Chinese tech advancement. It is also a boon to private equity and venture capital firms suffering from slow initial public offerings at home.

Industrial Bank, Guolian Minsheng Securities Co and Wuxi Venture Capital Group are among more than a dozen companies announcing plans to issue sci-tech innovation bonds on Thursday.

People's Bank of China Governor Pan Gongsheng said on Wednesday that nearly 100 companies are planning to sell such bonds to raise more than 300 billion yuan ($41.46 billion) in total, and he expects the list to grow further.

"Government support may help whet appetite of risk-averse bond investors," said Chen Yuting, analyst at Huafu Securities. "A booming market would in turn stimulate tech innovation."

Industrial Bank said it plans to raise 10 billion yuan via bond sales to fund innovative businesses and technology-related loans.

Brokerage Guolian Minsheng aims to issue up to 1.0 billion yuan of three-year bonds, mainly to finance tech-related investments.

Wuxi Venture Capital plans to sell 400 million yuan worth of three-year bonds. Proceeds will be used to swap existing equity investments and invest in new funds.

But there are signs proceeds from the bonds are used nowhere near technology or innovation in some cases.

Xuzhou Construction Machinery Group said on Thursday it plans to raise 1.0 billion yuan selling sci-tech innovation bonds to refinance bank loans.

Muyuan Foods said it will use the 300 million yuan from planned bond sales to replenish working capital.

($1 = 7.2367 Chinese yuan renminbi)