Companies will now be able to use all funds raised from private share placements to buffer operating capital and meet debt repayments, Caixin reports, as the government looks to give momentum to its cash-starved private sector.
The new rules also permit firms to make new share issuances six months after a private placement, cutting the time down from 18 months under the previous framework, China’s banking regulator said on Friday.
A squeeze on private sector financing following Beijing’s war on deleveraging earlier this year has lad to some publicly-traded companies to pledge shares as collateral for new loans. The recent market rout, however, has officials worried that a mass selloff could send stock prices plummeting.
The amendments will “further serve the development of the real economy, optimise the resource allocation of the capital market and encourage technological innovation,” said a spokeswoman for the CSRC.