China has announced stricter approval procedures for foreign borrowing, prompting companies to accelerate their efforts to secure liquidity for repaying bonds worth up to $100 billion this year.
The National Development and Reform Commission (NDRC) now takes between four to six months to approve bond issuances and loans with maturities exceeding one year, according to informed sources. This duration is double what it used to be, increasing pressure on companies trying to meet their financial needs.
Details of the Event
Sources indicate that the approval process can extend in some cases to nine months, as the regulatory body requires more details regarding repayment plans and the use of issuance proceeds, a practice that began in late 2025. This tightening reflects the NDRC's desire to control the increasing debts of weaker companies and local government financing entities.
Under these circumstances, Chinese companies are resorting to issuing short-term bonds, making it more challenging to balance investment needs with cash flows. Some insiders have noted that approvals for certain borrowers may be issued just a month before the maturity of existing bonds, creating uncertainty among investors.
Background & Context
For nearly a decade, Chinese leadership has sought to contain the rapid accumulation of off-balance-sheet debts among local governments, as these financing tools played a crucial role in Beijing's funding of infrastructure projects aimed at mitigating the impacts of the 2008 global financial crisis.
However, some companies with strong creditworthiness, or those operating in state-supported sectors, can still obtain approvals for foreign borrowing from the NDRC within a period of up to three months. Nevertheless, due to the lengthy approval process, some borrowers and lenders have begun to expedite refinancing decisions.
Impact & Consequences
The repercussions of this tightening are evident as Chinese companies have raised at least $2.3 billion so far this year through the issuance of short-term foreign bonds, a tool that does not require NDRC approval. This amount represents a record for this period.
Mahesh Ahluwalia, head of equity-linked capital markets in the Asia-Pacific region at J.P. Morgan, noted that the level of detail and questions posed by the NDRC has become more intense than it was a year ago. Companies now sometimes take between four to five months to secure that approval.
Regional Significance
As the deadline approaches for around $100 billion in foreign bonds later this year, pressures on Chinese companies are increasing, reflecting a state of regulatory ambiguity. This situation could affect Chinese investments in the Arab region, where many projects rely on external financing.
In conclusion, Chinese companies face significant challenges with the tightening of foreign borrowing restrictions, which may impact their financial stability and ability to achieve growth in the future.