Shanghai plans subsidies for offshore issuers selling bonds and measures to deepen debt investment as part of a renewed push to turn a long-dormant market in the city's free trade zone into a global funding hub, people familiar with the effort said.
The free trade zone was launched 13 years ago and an offshore bond market opened in 2016, but the market has failed to gain meaningful foreign participation, remaining largely a fundraising channel for Chinese borrowers.The initiative to attract offshore debt sales, not previously reported, comes as Beijing's promotion of the global use of its currency is finding the most traction in debt markets where low rates are spurring record issuance.The Shanghai Financial Regulatory Bureau proposes a suite of subsidies for advisory, legal, banking and other fees, running up to 2.2 million yuan ($327,000) per issue, with the most generous rebates offered to high-profile foreign issuers such as central banks, according to people familiar with the plans.The plans have not been finalised and could change, said the people, who did not want to be identified as the information has not been made public. The proposed subsidies would be available to the end of 2028 and apply to issues worth more than 200 million yuan at tenors of a year or more, they said.Additional subsidies would also apply for green bonds, where the proceeds are spent on environmentally friendly projects, or if the bonds use financial innovations such as the digital yuan.The Shanghai head office of China's central bank is also allowing onshore banks to buy FTZ bonds, a measure aimed at supporting a market designed for offshore investors, according to a source familiar with the matter.The central bank and the Shanghai government did not reply to Reuters requests for comment on the latest reforms and plans.PBOC Governor Pan Gongsheng vowed to develop the city into a hub for offshore financial services at last year's Lujiazui forum, an industry gathering at the heart of Shanghai's FTZ.Seminars hosted by China's bond depository and clearing house to promote the market to issuers, banks, brokerages and ratings agencies were held earlier this month in Shanghai and on Friday in Shenzhen, according to sources and invitation letters.LONG ROAD TO DEEPEN MARKETDeveloping the market into an international funding hub is a difficult task, with competition in Asia from Singapore and Hong Kong.One banking source, who spoke on condition of anonymity, said poor liquidity and relatively high issuance costs had been holding the market back.
