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Northeast Asia

Two countries, two difficult bond regulators

In both China and India, winning approval to sell offshore bonds can be a torment. One regulator applies the rules punctiliously, the other seemingly without rhyme or reason. It’s a wonder issuers can sell so much.

By Morgan Davis and Matthew Thomas

Chinese bond issuers now dominate the sale of G3 bonds, with 48.7% of the $189.5 billion sold in Asia ex-Japan this year coming from the country. But while Chinese issuance has become as regular as clockwork in the offshore market, the country’s bond market regulator is more akin to a stopped clock.

The National Development and Reform Commission (NDRC), a state planning body with the power to approve offshore bond plans, has a reputation as a high hurdle to offshore debt issuance. 

Officially, the regulator stepped back from approving deals several years ago, moving to a system where only registration is required. In practice, since the regulator often decides not to acknowledge that a deal has been registered, it is simply an approval process by a different name.

And then the regulator blows hot and cold. It left too many issuers languishing last year when it became increasingly unwilling to allow bonds to be registered. This year it has an altogether different attitude, handing out quotas at a breakneck pace. Issuers complain about a laborious process of approval, with city, provincial and state departments all needing to give a green light to a deal before it can hit the market.