China’s interbank market regulator has revealed new rules for technology and innovation bonds, reports Caixin. The move aims to steer more funding into hard tech sectors and address a structural imbalance that has favored state-owned giants over private firms.
The National Association of Financial Market Institutional Investors (NAFMII) on Monday released updated guidelines, set to take effect March 9. The move tackles a key obstacle in China’s drive for technological self-sufficiency. Although sci-tech bonds were created to finance innovation, issuance has been dominated by state-owned enterprises, with private firms accounting for less than 8% of total issuance across the market.
Under the revised mechanism, a tiered system will govern how issuers deploy proceeds. Companies with average annual R&D spending exceeding RMB 1 billion ($145 million) or an R&D-to-revenue ratio above 3% over the past two years will enjoy greater discretion in the use of funds. Issuers that fail to meet those thresholds must allocate at least 30% of proceeds to technology-related purposes, including project construction, R&D or mergers and acquisitions. Private technology companies are exempt from the 30% requirement, granting them the same flexibility as high-R&D spenders in an explicit effort to encourage their participation.