In August 2026, the large local cultural tourism industry investment enterprise where Tang Qian works decided to build a new cultural tourism project, requiring approximately 200 million yuan in funding. Several banks came calling with credit financing proposals featuring their most favorable interest rates. However, Tang Qian was unmoved.

As the chief financial officer of this cultural tourism investment enterprise, she had a different idea 鈥?issuing three-year corporate bonds. She ran the numbers and found that the average annual interest expense from issuing corporate bonds would be approximately 3.8 million yuan, lower than the 5 million yuan in interest expense from bank credit. Currently, Tang Qian is persuading the company's management to approve the bond issuance plan.

Since the beginning of this year, corporate demand for bond financing has increased notably. On September 14, financial data released by the People's Bank of China showed that in the first eight months of this year, the proportion of bond and equity financing in the increment of total social financing rose to 50.31%, significantly exceeding the proportion of loans. Among this, corporate bonds' share of the total social financing increment rose to 11.67%, up 5.8 percentage points from the same period last year.

Another set of data more intuitively illustrates the shifting dynamics between bank credit and corporate bonds. In the first six months of this year, RMB loans extended to the real economy increased by 10.76 trillion yuan, a year-on-year decrease of 1.98 trillion yuan. By comparison, net corporate bond financing reached 2.07 trillion yuan, a year-on-year increase of 916.7 billion yuan.

Zhang Qiang is the branch manager of a joint-stock bank in Shenzhen. He revealed that in the third quarter, the number of enterprises attempting to issue corporate bonds increased by more than 30% compared to the first half of the year, averaging 10 to 12 per month. He found that those keen on issuing corporate bonds are mainly central and state-owned enterprises, local industrial investment groups, listed companies, and industry-leading enterprises. The key driver is that while loan annualized interest rates hover around 2.5% to 3%, the current bond issuance rates for enterprises with credit ratings of AA or above are generally below 2.1%.

Zhang Qiang said that the financing structure of enterprises is undergoing profound changes 鈥?the proportion of direct financing such as bonds continues to rise, exerting a certain "substitution effect" on banks' corporate lending. This has created a sense of crisis among some frontline corporate client managers, who wonder how they will meet their corporate loan disbursement assessment targets if large enterprises collectively shift to bond financing.

Choosing to Issue Bonds

Tang Qian learned about the advantages of issuing corporate bonds at a corporate financial management seminar held in March. At that time, she was not particularly drawn to corporate bond financing. After her company decided in August to raise 200 million yuan to launch a new cultural and creative project, senior management proposed reducing financing costs by at least 40 basis points, which prompted her to consider bond issuance.

Although several banks offered loan proposals with their most favorable rates, the loan interest rates were generally around 2.5%, only 15 to 20 basis points lower than last year's loan rates, falling short of management's cost reduction requirements. By contrast, issuing corporate bonds produced a different result. Tang Qian's preliminary estimate showed that given her company's AA+ credit rating and current corporate bond issuance rates, the issuance cost of the relevant three-year corporate bond (coupon rate plus underwriting fees) would not exceed 1.95%. This meant the company's actual financing cost would drop by at least 70 basis points compared to last year's loan rates, exceeding the target.

On September 10, Henan Airport Investment Group Co., Ltd. (hereinafter referred to as "Henan Airport") completed the issuance of 1 billion yuan in three-year corporate bonds. According to a comprehensive assessment by China Chengxin International, Henan Airport's entity credit rating is AAA with a stable outlook. A person from Henan Airport told reporters that before deciding to issue corporate bonds, several banks had offered corporate loan proposals with optimal rates of 2.5% to 2.7%. However, they found that these loan rates were still more than 60 basis points higher than the coupon rate of corporate bonds, and the company's management ultimately chose to issue corporate bonds.

The person said the company also caught a good window for bond issuance. On September 8, the spreads of 10-year AAA and AA+ corporate medium-term notes over comparable government bonds fell to 29 basis points and 44 basis points respectively, hitting their lowest levels since 2025. Affected by this, the coupon rate for this three-year corporate bond was set at 1.68%, lower than the company's previous estimate of 1.7% to 1.8%.

The Henan Airport person told reporters that after management saw the financing expenses reduced beyond expectations, they required the finance department and the financing department to strengthen coordination and further increase the proportion of direct financing instruments such as bonds in the company's financing structure.

In early September, the Zhumadian City Industrial Investment Group where Zhao Yong works completed the issuance of 324 million yuan in five-year corporate bonds. Zhao Yong told reporters that since the company's entity credit rating is AA+, the finance department initially expected this corporate bond to achieve full subscription with a coupon rate no higher than 2.3%. What surprised the company was that the bond's overall subscription ratio reached 5.8 times, with a coupon rate as low as 2.12%, setting a historic low for local bond issuance rates in this category. Recently, the company's senior management required the finance department to seize the current opportunity of low-interest bond financing, further increase the proportion of bond financing, and strive to replace some high-interest loans with low-interest bond funds.

Zhang Qiang has a deep impression of local large enterprises' enthusiasm for bond financing. He told reporters that corporate bond financing costs are lower and are continuously capturing market share from corporate loans. Since the second half of the year, when he visited local large enterprises to seek expanded corporate loan cooperation, they had already chosen the latter between loans and bond issuance. In Zhang Qiang's view, this is also a result of interest rate marketization. Currently, loan interest rates have begun to stabilize around 3%, but money market rates continue to decline under the influence of moderately accommodative monetary policy and other factors, driving the comprehensive financing costs for large enterprises with AAA and AA+ credit ratings (including bond underwriting fees of 0.07% to 0.1%) to generally fall below 2.3%, prompting enterprises to proactively choose bond financing based on financial cost savings.

There is another calculation behind enterprises' enthusiasm for bond issuance. Zhao Yong pointed out that the reason his company's senior management required increased bond issuance is also because in recent years the company has launched many new investment projects, leading to significant consumption of its own funds. Bond-raised funds can serve as project capital, indirectly easing the pressure on the company's own working capital turnover.

Zhang Qiang noticed that in the first quarter, those keen on issuing corporate bonds were mainly local large industrial investment enterprises and central and state-owned enterprises. Since the second half of the year, listed companies and industry-leading enterprises have taken over, proactively inquiring about the feasibility of corporate bond issuance and issuance rates. Among them, some listed companies and industry leaders with AA+ credit ratings told Zhao Yong that they hope to control comprehensive bond financing costs at around 2.3% and plan to use part of the bond proceeds to prepay outstanding loans (with interest rates of 3.5%).

Banks' Mixed Feelings

Large enterprises' enthusiasm for bond issuance makes Zhang Qiang both happy and uncomfortable. Since the beginning of this year, his joint-stock bank has been vigorously promoting "commercial banking plus investment banking" comprehensive corporate financial services, requiring frontline corporate client managers to expand investment banking businesses such as corporate bond underwriting and industrial mergers and acquisitions to increase non-interest income contributions.

Initially, Zhang Qiang worried that large enterprises in his jurisdiction lacked understanding of corporate bonds and would be reluctant to test the waters. Now, as large enterprises in his jurisdiction have successively issued corporate bonds, he found that as of the end of August this year, the branch had already completed the investment banking revenue targets set by the parent branch. Among this, revenue from corporate bond underwriting and bond proceeds custody grew by more than 40% year-on-year, exceeding 8 million yuan.

According to Zhang Qiang, corporate bond underwriting is making a significant contribution to comprehensive corporate business revenue. Five enterprises plan to use the raised funds for daily operations and new project investment. These enterprises not only entrusted bond proceeds custody to Zhang Qiang's joint-stock bank but also handled payroll services, corporate wealth management, and supply chain fund settlement, depositing more low-interest corporate demand deposits for the branch while boosting settlement and wealth management business revenue.

However, every coin has two sides. In August, several corporate client managers at the branch repeatedly told Zhang Qiang that large enterprise bond issuance was putting considerable pressure on them to meet corporate credit disbursement assessment targets. In early September, Zhang Qiang conducted a review and analysis of the branch's corporate client managers' credit disbursement target completion and found that 30% of client managers still had new credit disbursement lower than the same period last year, because the new credit quotas they had painstakingly negotiated with large enterprises for this year were suddenly "intercepted" by corporate bonds.

Zhang Qiang suggested that corporate client managers increase market penetration efforts, targeting medium-sized enterprises in the jurisdiction (annual revenue of 50 million to 100 million yuan, total assets under 1 billion yuan) to ramp up credit disbursement. These enterprises generally have credit ratings that have not yet met bond issuance conditions. Even with credit enhancement measures for corporate bond issuance, their comprehensive bond financing costs would likely exceed 3%, so these enterprises are more inclined to seek bank credit.

However, some corporate client managers did not act quickly. Zhang Qiang admitted that their hesitation is understandable. Medium-sized enterprises in the jurisdiction are inferior to large enterprises in terms of risk resistance and refinancing capabilities, with correspondingly higher exposure to loan overdue and bad debt risks. With banks focusing on stabilizing credit asset quality and vigorously reducing credit overdue and non-performing loan ratios in the second half of the year, they dare not take risks.

A corporate business supervisor at the East China branch of a major state-owned bank told reporters that since the beginning of this year, dozens of their strategic-level corporate clients (basically local large industrial investment enterprises, listed companies with market capitalization exceeding 100 billion yuan, and well-known industry leaders) have shown considerable willingness to issue bonds, with 70% of them currently working to increase bond issuance scale, indeed creating a certain "substitution effect" on corporate credit.

"However, branch leadership believes this may not necessarily pressure the branch to complete its annual corporate credit disbursement task. The key is for the branch's corporate department to take the initiative, expand the coverage of corporate credit services, and fill the gap through incremental credit," said the corporate business supervisor.

Since the second half of the year, the branch has required the corporate department to increase credit disbursement to advanced manufacturing, high-tech, and green industries to capture a larger corporate credit market share from high-growth industries.

"This is also a new challenge that banks must address in response to changes in the market financing structure," said the corporate business supervisor, noting that as the proportion of direct financing continues to increase, corporate credit will inevitably face certain substitution pressure. Under this major trend, banks themselves need to proactively optimize their credit structure and upgrade credit services, increase credit deployment in growth-stage enterprises, and find new anchors for stable growth in corporate credit.