Chinese state-owned company Central Huilin Investment Co. is set to issue one of the largest yuan bond issues ever, at potentially 80 billion yuan. That’s $11.7 billion.
Interestingly, Huilin also happens to be a large shareholder in four major Chinese banks. (ICBC, China Construction Corp, Bank of China, and Agricultural Bank of China.)
In addition, it’s a subsidiary of China’s sovereign wealth fund.
Thus the bond issue is clearly government policy in action. Fitch Ratings even plans to give Huilin’s bonds the same rating as Chinese sovereign debt itself. Its massive size represents an escalation of China’s efforts to mop up rampant liquidity and control asset bubbles in the economy.
Bloomberg: Selling bonds would be a first for Huijin, which was set up in 2003 and used the nation’s foreign exchange reserves to prop up Industrial & Commercial Bank of China Ltd. and Bank of China Ltd. A sale would drain surplus funds from the banking system, helping the government control asset-price gains, said Fitch Ratings analyst Wen Chunling.
“This is quite an interesting move,” said Wen, who is based in Beijing. It “allows the government to mop up liquidity from the financial system at a time when an asset bubble is forming.”