China's securities watchdog on Thursday eased rules covering the issuance of subordinated debt, aiming to improve securities firms' net capital and increase liquidity.

The China Securities Regulatory Commission defines such debt as having a later liquidation than ordinary debt.

"It includes subprime lending to shareholders and institutional investors, as well as subordinated bonds issued by exchanges," the commission's statement said.

Subordinated bonds are a type of bond that, in the event of liquidation, have a lower priority than other bonds.

Such bonds can be traded on securities exchanges, the national interbank market and other places approved by the commission, it said.

The new policy will increase the number of institutional investors, and shorten the expiry date of subordinated debt. The approval process will also be eased.

A commission official said the measures will enhance securities firms' initiatives in issuing such debt for financing more funds, which can support innovation in management and financial products.