China plans to centralise commercial paper market: Report

China's central bank vice governor Pan Gongsheng.
China's central bank vice governor Pan Gongsheng.PHOTO: BLOOMBERG

BEIJING (REUTERS) - China plans to centralise the country's commercial paper market, central bank vice governor Pan Gongsheng was quoted by Shanghai Securities News as saying on Wednesday (March 9).

Commercial paper, sometimes known as corporate bills in China, refers to short-term obligations with maturities typically within 270 days issued by banks, corporations and other borrowers to investors with temporarily idle cash.

"The central bank is pushing forward to build a unified national bill market, which is included in the central bank's work plan," Pan was quoted as saying.

An electronic system will help cut commercial paper trading costs and risks, he added.

The news follows reports that Agricultural Bank of China Ltd. may lose 3.8 billion yuan (S$808.95 million) from a bills of exchange scam allegedly carried out by two employees.

In 2015, Chinese banks and other corporates issued a combined 22.4 trillion yuan in commercial bills, up 1.3 per cent from the previous year, according the central bank's fourth-quarter monetary policy report.

Outstanding bills stood at 10.4 trillion yuan at the end of last year, up 5.4 per cent, the report said.

China's commercial paper market is highly fragmented, with transactions conducted mainly through dozens of regional centres.

The absence of a centralised system has meant poor liquidity and limited trading participation, which is mostly conducted by the People's Bank of China, commercial banks, industrial companies and businesses that focus solely on discounting and rediscounting.

There have been calls from the banking industry and other market participants for a national commercial paper exchange for many years, but regulators have so far not given any firm timeframe for implementation.