Little fuss has been made over the first US dollar bond from Baosteel, China’s biggest listed steelmaker, sold this month. One of the best steel company credits in the world, Baosteel still paid close to 4 per cent to borrow $500m with its Hong Kong issue. But the bond will be priced off US Treasuries, not China’s local interest rates – and that may be worth its weight in gold to Baosteel, even in a time of Federal Reserve tapering. Even good Chinese companies face a tougher interest-rate environment and higher capital costs in 2014. This is worth fussing over.
Few would have expected 2013 to be a year in which China’s central bank raised interest rates by 75 bps, despite one of the biggest slowdowns in the country’s economic growth for some time (to a mere 7.5 per cent). The People’s Bank of China was more concerned with irrepressible growth in broad money, which is likely to rise 15 per cent this year, above the PBOC’s target.
Of course, the reddest flag might seem to be waving in short-term credit markets. Shanghai’s stock market shed 5 per cent this week, and fell nine days in a row for the first time since 1994, after the seven-day repo rate (the best measure of short-term interbank liquidity) spiked past 7 per cent. The PBOC is tightening here, too, much as it did in June. But both episodes were salved with central bank liquidity, once a lesson was taught to banks to lend carefully.
Moves by the PBOC slowly to liberalise interest rates will be harder to put back into their box. These include the introduction of certificates of deposit in interbank lending, which track three-month Shibor, a more market-determined benchmark that rose by 1.5 percentage points in 2013. This will feed through to corporate loans, while corporate bond pricing will also factor in a doubling in bill financing rates (to 8 per cent) in 2013, according to Bank of America Merrill Lynch.
“It is not that there is no money, but the money has been put in the wrong place,” as state media said of the PBOC’s June tightening. There is a lot of that money in Chinese companies: they have an average debt-to-equity ratio of 110 per cent, according to the IMF. The ratio in India is 80 per cent. So welcome, at last, to market-priced credit risk in China. More Chinese companies could follow the lead of Baosteel and issue in US dollars. But for those who cannot, strap in: it is going to be a bumpy 2014.
随着中国央行采取种种举措慢慢放开利率管制，走回头路将变得更加困难。这些举措包括，推出追踪3月期上海银行间同业拆放利率(Shibor)的银行间同业存单。Shibor是一种更加市场化的基准，2013年迄今上升了1.5个百分点。这将对企业贷款产生影响，美银美林(Bank of America Merrill Lynch)数据显示，企业债券的定价也将考虑2013年票据融资利率翻一番（至8%）的因素。