Chinese companies are using cheap funds raised via "virus bonds" to store cash and cover debts as  Beijing works to channel money into coronavirus-affected areas of the economy, according to Reuters News Agency.

The Reuters report reveals that only one-third of the roughly 14 billion yuan ($2bn) raised under a new fast-track regulatory process for "virus prevention and control bonds" is used for the cause. The so-called virus bonds go through a faster approval process that takes just days, rather than weeks for other types of bonds. They also carry yields much lower than on other debt as state-controlled banks are encouraged to buy them. 

The virus epidemic has killed more than 1,350 people and sickened 60,000 in China, stretching the country's resources at a time when the economy is already slowing down. Issuers of anti-pandemic bonds must use some proceeds to sell or produce items relevant to combating the epidemic, such as medical equipment, disinfectants, and vaccines and medicines, said the National Association of Financial Market Institutional Investors, a bond market regulator, last week.

Companies that have announced bond issuance plans under this category say they are putting at least 10 percent of the cash into investments related to the outbreak.

On Thursday, the official China Securities Journal said regulators should strengthen oversight of virus-bonds issuance so as to prevent some firms from taking advantage of a troubled situation.

Fuyao Glass Industry Group, a top Chinese glassmaker, is raising 600 million yuan ($86m) via a three-year virus bond. The company said it will use one-tenth of that to produce glass for ambulances.

Pig-producer Muyuan Foods said about half of the proceeds from its planned 500 million yuan ($72m) bond issuance will be used to repay bank loans, while the remainder will be used to ensure adequate meat supply during the outbreak.

Xiamen Airlines and Shenzhen Airlines are also issuing virus bonds, but will use most of the money to refinance debt.

Just two issuers - drugmakers Tasly Holding Group and Jointown Pharmaceutical Group - say all the money raised from the bonds will be used in the anti-virus campaign.

Jointown, the biggest private pharmaceutical firm in Hubei Province, the epicentre of the coronavirus, said it was facing challenges supplying facial masks, protective suits and medicines.

"We are under sustained stress in working capital and there is a liquidity shortage," the company said.