China policy round-up: PBoC rolls out first TMLF, Shanghai tech board sees progress, central bank offers bills swap

In this round-up, the People’s Bank of China launched the first targeted medium-term lending facility (TMLF), a central committee for deepening reform signed off on Shanghai tech board launch, and the central bank set up bills swap to support banks’ perpetual bonds.

  • By Rebecca Feng
  • 25 Jan 2019
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The PBoC launched a first one-year TMLF of Rmb276bn ($40.8bn) at 3.15% on January 23, 15bp below the regular one-year MLF interest rate.

The scheme was first introduced on December 19 last year to help small and micro enterprises (SMEs) to secure funding from bigger banks.

Banks receiving the funds should use them to create loans to SMEs, ideally at a lower interest rate. However, the benefit of a lower interest rate is not likely to be passed on to small lenders, according to a Thursday note by Trivium, a consulting firm.

“Some analysts are describing the use of the TMLF as a backdoor interest rate cut,” Trivium suggested. “But it’s not, really. Banks won’t be passing on the 15bp savings to SMEs. That saving is the incentive to get banks to lend where they otherwise wouldn’t.”


The establishment of the registration-based Shanghai tech board, first announced by President Xi Jinping during the import expo in November, got a step closer this week.

Alongside 14 other documents, China’s central committee for deepening overall reform, established in 2013 under the direct supervision of the Central Committee of the Communist Party of China, passed a plan and a guideline for launching the tech board on the Shanghai Stock Exchange and experimenting with the registration-based IPO system. The details of the plan and the guideline were not disclosed.


In the evening before Bank of China opened books on the first perpetual bond issued by a Chinese bank onshore, PBoC announced that it would set up a central bank bills swap programme to support liquidity for banks’ perpetual bonds.

Perpetual bonds issued by banks with ratings higher than AA will count as collateral for the medium-term lending facility (MLF), the targeted medium-term lending facility (TMLF), and the standing lending facility, according to the statement.

The purpose of introducing the bills swap, according to a separate statement, is to encourage investors to purchase banks’ perpetual bonds and in turn encourage banks to lend to the real economy.

The duration of the central bank bills swap is initially set at three years. These swapped bills cannot be converted into cash or used to engage in buyout activities.

For the instruments to become eligible as collateral, banks issuing these perpetual bonds must meet several qualifications. The bank’s most recent quarter’s capital adequacy ratio should be higher than 8%, its bad debt ratio cannot exceed 5%, and its total assets should be higher than Rmb200bn. The banks also need a record of having seen net profits for the past three years. Lastly, the banks’ purpose in issuing perpetual bonds must be to support the real economy.

On the same evening, the China Banking and Insurance Regulatory Commission stated that it would allow issuance companies to purchase commercial banks’ perpetual bonds and tier two bonds.

“The moves are not monetary measures in that they do not involve creation of money,” MK Tang, senior China economist at Goldman Sachs, wrote in a Friday note. “Nor do they mean that the PBOC is indirectly providing capital to banks, as the central bank swaps are of limited duration. Rather, they effectively represent an expansion of the PBoC's collateral framework.”


More global banks seeking a majority-owned venture on the mainland will see their applications approved in the first half of 2019, Fang Xinghai, vice chairman of the China Securities Regulatory Commission, told Bloomberg in Davos.

Swiss bank UBS recently increased its stake in a local securities joint venture, UBS Securities, to 51%, the second institution to do so after HSBC. JPMorgan Chase and Nomura have also filed applications.

  • By Rebecca Feng
  • 25 Jan 2019

GlobalRMB Panda Bonds league table

Rank Arranger Share % by Volume
1 Bank of China (BOC) 21.17
2 China Merchants Securities Co 17.84
3 Industrial and Commercial Bank of China (ICBC) 14.86
4 Agricultural Bank of China (ABC) 10.81
5 China Securities 9.01

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 17-May-19 Trafigura The Netherlands 540
2 16-May-19 CITIC Pacific China 1,000
3 15-May-19 Republic of the Philippines Philippines 2,500
4 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 1,000
5 29-Apr-19 Semiconductor Manufacturing International Corp (SMIC) China 500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Standard Chartered Bank 25.05
2 Credit Agricole 7.04
2 HSBC 7.04
4 Bank of China (Hong Kong) (BOCHK) 6.90
4 Bank of Communications Hong Kong Branch (BOCOM HK) 6.90

Latest Offshore RMB Bonds

Pricing Date Issuer Country Size Rmb (m)
1 22-May-19 Agricultural Development Bank of China (ADBC) China 3,000
2 16-Apr-19 ICBC Singapore Branch China 1,000
3 10-Apr-19 Bank of China Macau Branch (BOC Macau) China 4,500
4 15-Mar-19 Bank of Communications Hong Kong Branch (BOCOM HK) China 2,500
5 13-Mar-19 Daimler International Finance Germany 1,000