People's Bank of China and China Securities Regulatory Commission set out measures to support issuance of science and technology innovation bonds

The People's Bank of China and the China Securities Regulatory Commission jointly issued an announcement setting out a policy framework to support the issuance of science and technology innovation bonds, aimed at expanding the multi-tier bond market and channelling funding to technology innovation activities and related financing needs. The framework allows three broad issuer types to raise funds for technology innovation-related investment and financing: financial institutions, technology companies, and private equity and venture capital institutions. Financial institutions including commercial banks, securities firms and financial asset investment companies may use proceeds through loans, equity and bond investments, fund investments and capital intermediation services to support technology innovation business. Technology companies may use proceeds for product design, research and development, project construction and operations, and mergers and acquisitions. Eligible equity investment institutions may use proceeds to establish or expand private equity investment funds. Issuers may choose issuance methods and tenors flexibly and design bond terms to better match funding needs, while issuance is supported through a streamlined process, flexible staged issuance, simplified disclosure with investor-agreed waivers, and balance management for financial institutions. The measures also call for more tailored credit rating approaches, a dedicated underwriting assessment and market-making mechanism for these bonds, broader investor participation including social security funds, corporate annuities, insurance funds and pensions, and expanded risk mitigation tools such as credit protection arrangements, credit risk mitigation instruments, credit default swap contracts and guarantees. Use-of-proceeds controls are reinforced through ongoing and ex-post management and by including these bonds in evaluations of financial institutions’ technology finance service effectiveness. Self-regulatory organisations in the interbank and exchange bond markets are instructed to accelerate supporting rules, while market infrastructure providers may offer dedicated issuance, trading, registration, custody and clearing services and reduce related fees where appropriate.