To vigorously develop financial markets, accelerate the establishment of a multi-level capital market system, improve the proportion of direct financing and broaden financing channels for non-financial enterprises, National Association of Financial Market Institutional Investors (NAFMII) organized market members to draft the Rules for the Issuance of Private Placement Debt Financing Instruments of Non-Financial Enterprises in the Inter-bank Bond Market (called the Rules for the Issuance of Private Placement Bonds thereafter). The Rules for the Issuance of Private Placement Bonds, examined and approved on the Second Session of the Second Executive Council Meeting of NAFMII on August 27, 2010, was released recently by NAFMII on April 29, 2011 with the approval of the People's Bank of China. The Rules for the Issuance of Private Placement Bonds shall go into force as of the date of released.

Launching private-placement bonds issuance method on the inter-bank market provides strong support to facilitate SME financing needs and further the role of the bond market in promoting the development of the real economy. It also has a positive effect on the efforts to continue promoting financial market innovation, drive steady optimization of investors structure in the financial market, establish a sound financial system risk diversification and sharing mechanism, as well as maintain macro-prudent and stable financial system.

The Rules for the Issuance of Private Placement Bonds defines and standardizes main contents of private-placement bonds, including the general principles, registration, issuance, deposit, custody, circulation, information disclosure, self-regulatory management, and market discipline. With its framework designed focusing on the improvement of corporate financing efficiency and controlling market risk, the Rules for the Issuance of Private Placement Bonds draws on the development experience of mature markets, highlights the features of private placement method and adheres to market-oriented principles.

Different from public issuance, in the private placement mode, the issuer and investors sign Private Placement Agreement and determine specific content and manner of information disclosure through negotiation. Private-placement debt financing instruments shall be registered with NAFMII, and adopted a centralized custodian method in which issuers need to use their real-name in the accounting system. This is to ensure market administration authorities and self-regulatory organizations can timely get information such as the overall size and structure of the private placement bond market, so as to keep the smooth operation of the market.

Since its establishment in 2007, NAFMII has been adhering to promoting market discipline, innovation, service and other efforts of the inter-bank market by closely uniting and relying on market members. NAFMII’s organizing market members to draft the Rules for the Issuance of Private Placement Bonds complies with the strong demand of market members, and is a beneficial exploration to promote market innovation and development. It is the requirement to implement the policies of the Twelfth Five-year Plan on vigorously developing the financial market, continuing to encourage financial innovation and significantly increasing the proportion of direct financing. In addition, it is an important measure to promote the debt financing instrument market to develop both in scope and in depth.