China Vanke Co. prepares for bond sale

In the first offering since the Beijing government has eased regulations, China Vanke Co. Ltd.<200002><000002> has plans to sell about RMB 2 billion worth of bonds, Bloomberg reported.

According to sources close to the transaction, Vanke has hired CITIC Securities Co. to arrange the bond sale. The sale is backed by the developer's assets and conforms to the government's new rules, the sources said.

Previously, bond sales were supposed to be backed by state-owned banks. However, the bonds no longer require a bank credit guarantee, the report said.

Shang Fulin, the chairman of China Securities Regulatory Commission, wants to widen the financing channels of domestic firms, media reported. This is done by following international practice by allowing the market to determine the value of bond sales, the report said.

Before the new rules, the National Development and Reform Commission, China's top economic planner, would set quotas on corporate debt offerings and the central bank would propose interest payments on the
Securities, causing investors to view the corporate debts as being quasi-government bonds, sources said.

According to the report, the new rules allow companies whose shares are traded on either domestic or overseas exchanges to sell bonds. As mentioned, companies no longer need bank guarantees for the bonds sold as well.

The new rules will make debt sales easier, Bloomberg reported. China's corporate bond market had lagged behind the US$2.8 trillion stock market because of government restrictions toward non-state companies selling debt.

Analysts expect with the new rules, China's bond market will eventually surpass her stock market.

Draft rules were issued in June by the China Securities Regulatory Commission, the only agency in China with power to approve debt sales by publicly traded companies, the report said. The final rules were published on the China Securities Regulatory Commission's website Tuesday.

China Vanke is China's biggest publicly traded developer while CITIC Securities is China's biggest publicly traded brokerage.

China Vanke Co., Ltd., headquartered in Shenzhen, Guangdong Province, develops residential buildings in 19 cities throughout China and provides property management services.