China should introduce “junk” bonds to provide smaller private companies with new funding channels as the country develops its debt capital market, a senior Chinese financial official has suggested.
“It may be a little bit radical, but I think we should promote junk bonds in China,” Guo Shuqing, chairman of state- controlled China Construction Bank, the country's second- largest lender, told the Financial Times. “But we would probably use a more appropriate name, like ‘innovative' bonds or ‘high-yielding' bonds.”
Mr Guo, a former deputy central bank governor, said high-yielding, higher-risk corporate bonds – which are not currently permitted in China – would provide a much-needed source of funding for private start-up and early-stage enterprises, which are generally shunned by the state-dominated banking sector.