The National Development and Reform Commission (NDRC), China’s top economic planning agency, recently invited Citigroup for an exchange of views on managing risks associated with Chinese firms issuing offshore debt.
Topics discussed included global financial trends and controlling the scale and risk of offshore corporate debt issuance in the context of the US
Federal Reserve policy outlook and movements in the yuan, a notice posted on the commission’s website said yesterday.
As recent Federal Reserve statements have appeared to telegraph a probably rate hike in June, the second since the global financial crisis, the yuan has weakened significantly.
The onshore spot rate has fallen around 1.2% against the dollar since the end of April as the dollar has strengthened.
Yesterday, China’s central bank set the state-administered midpoint of the yuan’s daily trading band at the weakest level against the dollar in five years.
Corporate debt issuance has also boomed in China over the past year, with net issuance hitting a new high of 1.3tn yuan ($198.12bn) in the first quarter, according to central bank data.
Offshore issuance has been weaker as corporates took advantage of low domestic rates, but a sharp sell-off in April has pushed onshore issuance down and borrowing costs up, which could induce more issuers to look offshore. The NDRC oversees issuance of so-called enterprise bonds, usually issued by large state-owned firms.
Calls to Citigroup’s media department were unanswered.