China Ramps Up Regulatory Scrutiny Of Overseas Borrowing

China is ramping up scrutiny of companies aspiring for offshore debt as defaults and fallout from dollar strength concerns weigh, Bloomberg reports.
China's property sector has driven offshore defaults to a record $37.3 billion in 2022. Onshore delinquencies, meanwhile, have fallen sharply.
China aims to promote the "healthy and orderly development of companies' overseas financing" and prevent foreign debt risks by the move.
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Borrowers, including financial firms, will have to register, report and receive approval for offshore debt issuance with tenors longer than a year from the National Development and Reform Commission, according to an NDRC draft.
Earlier NDRC talked about actively guiding companies to "optimize the structure of their foreign debt interest rates and maturity."
Borrowers are bound to regularly submit information, including their use of fundraising proceeds to the NDRC and report significant situations that may impact their debt repayment.
As per experts, post-issuance monitoring will urge borrowers to supervise themselves in their financial situations, enable regulators to control credit default risks, and ensure the use of proceeds is consistent with what companies claimed.
The enhanced oversight should reassure investors that China's external debt will be well-monitored and is thus unlikely to pose risks to stability even with dollar strength, as per DBS Bank.
Earlier, China ramped up regulations regarding overseas data transfer norms affecting companies like Alibaba Group Holding Ltd BABA and others that collect troves of user data.
At least four firms listed in China explored issuing global depositary receipts on the SIX Swiss Exchange by 2022 to escape domestic scrutiny.
Photo via Wikimedia Commons

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