With Chinese banks scaling back lending, China's corporate sector is raising money in the domestic bond market at a record pace.
The Wall Street Journal reports that the bonds have been sold almost exclusively to domestic investors, led by mutual funds. Mutual funds have accounted for some 50% of the demand for the most common type of corporate bond in 2012, up from 45% in 2011 and 18% in 2010.
Citing data from Dealogic, the Journal says the value of yuan-denominated bonds sold by nonfinancial Chinese companies rose to a record $327 billion in the year to Dec. 19, a 77% increase over the $185 billion issued over the same period in 2011.
Chinese companies' push into the bond market comes amid Beijing's efforts to wean businesses off bank loans and to build a competitive credit market that would better reflect the cost of capital.
Chongqing Light Industry & Textiles Group—owned by the city of Chongqing in China's southwest—was able to sell 600 million yuan ($96 million) in five-year bonds at a yield of 5.95%, below the prevailing interest rate of 6.4% on five-year bank loans.