China has authorised asset investment companies (AICs) to carry out asset management operations in a bid to expand their funding sources to conduct debt-to-equity swaps.
The move comes as the country aims to lower leverage and debt-for-equity swaps have been a key part of this goal.
The country has now given the go-ahead to AICs to offer investment plans in market-oriented debt-to-equity assets.
These include convertible bonds, debt-to-equity special bonds, ordinary shares, preferred shares as well as debt-to-preferred shares.
The move was confirmed by the China Banking and Insurance Regulatory Commission (CBIRC).
Through private fundraising, the AICs will be allowed to raise funds from qualified investors with a minimum of RMB5m ($705,000) in net family assets or with an annual income of at least RMB600,000 in the past three years.
Insurance fund and pension funds can invest in the investment plan as well, CBIRC stated.
Five Chinese lenders, namely ICBC, Agricultural Bank of China, Bank of China, China Construction Bank as well as Bank of Communications, have set up AICs.
In this context, Caixin cited National Development and Reform Commission data.
According to the data, RMB909.5bn of debt-to-equity swaps were conducted as of April 2019, which include 254 projects carried out by AICs involving RMB400bn.
China’s financial services sector has undergone a major overhaul recently.
One of the changes includes the opening of its securities market to foreign players to boost competition.