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Legislation and institutional innovation in the development of China's bond market

Author: XiangDong From: www.yourpaper.net Posted: 2009-03-30 13:57:12 Read:
Abstract: The capital market of China's financial reform and development of key areas. With the gradual deepening of reform and opening up, the bond market is more and more important role in China's economic and social development. At present, China's bond market already has many favorable conditions to accelerate the development of economic growth also needs to have a fully functioning, unified, open, in line with the international practice of the bond market. We must learn from the experience and lessons learned in the development of the stock market, further strengthening of institutional infrastructure to regulate the development of the bond market. Split due to the market system, the separation of the regulatory system, not the system of laws and regulations, lack of coordination, imperfect, a lot of the constraints of the development of China's bond market, we must focus on the establishment of a unified national bond market, to accelerate change and improve the relevant legislation, the focus on institutional comprehensive, coordinated and sustainable development of the innovation, to achieve China's bond market.
Keywords: bond market, institutional innovation legislative norms

Bonds is the need of governments, corporations, international organizations, supranational entities, banks, financial institutions and individuals to raise funds for their activities and issued securities can be converted into the currency. Fund raising and financial market transactions is called the capital market. According to the organizations to raise funds, the capital market is divided into the money market, bond market and stock market. The bond market is an important part of the capital markets. The history of the development of the world's capital markets, bond market development is essential for economic development and social prosperity. The end of 2002, statistics in the global bond market, the stock of domestic bonds over 34 trillion U.S. dollars, accounting for about 80% of the stock of bonds. Domestic debt stock average annual growth rate of around 6%, higher than the growth rate of world GDP. In the domestic debt stock, the largest country in the world developed countries, the Group of Seven, totaling nearly $ 30 trillion. The United States accounted for 47.6% of the world's domestic debt stock, which is 155% of the national GDP. So far, the bond market is still the main market of the world's capital markets to raise funds, and plays a significant role in promoting economic and social development.

One of China's bond market has gone through several different stages of development

Bonds appear in our country can be traced back to the Qing Dynasty, after a course of more than a century of development, but the real development in the reform and opening up. Can be roughly divided into three stages:
(1) China's bond market its infancy (before 1949). The first time in the history of our country to issue bonds, 1894, the Qing government for the payment of the Sino-Japanese War military spending by the Ministry issued to officials and business tycoons "Commercial Loan" issue silver more than 11 million two total. A year after the war, the Qing government for the delivery of reparations, and issued bonds ("Zhaoxin Stock"), the total amount of silver 100 million taels. Successive governments of the old China since the Qing government began issuing bonds to maintain fiscal balance, have issued a large number of bonds. Has issued dozens of bonds from the Northern government to the government of Chiang Kai-shek.
(2) the initial stage of development after the founding of China's bond market (1949-1981 years). The new same after the establishment of the Central People's Government in China had the January 1950 issue of People's Victory 'Bond the actual issuance amount equivalent to RMB 260 million yuan, all to pay off the principal and interest of the bonds on November 30, 1956. 1954, China issued the country's economic construction bonds, issued a total of five times in 1955, issued a total of 3.935 billion yuan to be fully repaid in 1968. After more than 20 years, China has not issued any debentures.
(3) China's bond market after the reform and opening up and rapid development stage (1981-present). In order to balance the budget, starting in 1981, the Ministry of Finance began to issue treasury bills issued by enterprises, government agencies, organizations, military units, institutions and individuals, 2006 issue consecutive 25 years. Among them, in 1987 to promote the construction of the country's infrastructure for large-scale projects to raise medium-and long-term funds for construction, China issued a 3-year national key construction bonds, issued by the local government, local businesses, organizations, groups, and institutions, and urban and rural residents . 2-year national construction bonds was issued in 1988, in support of the national key construction issue object for urban and rural residents, Foundation organizations, financial institutions and enterprises. The same year, to make up the deficit, raise funds for construction of another issue financial bonds issued mainly targeted at professional banks, integrated banks and other financial institutions. In 1989, the Chinese government issued special bonds, not to individual enterprises only. Since 1989, the bonds were issued four times, and the deadline is 5 years. In the same year, the bank is a hedge against inflation supplement rate policy, the Ministry of Finance began to issue state-owned hedge against inflation supplement preserve and increase the public debt.
China from the mid-1980s began to issue RMB financial bonds. In 1985, the Industrial and Commercial Bank of China, Agricultural Bank of China began to be issued in the same industry RMB financial bonds. Since then, banks and trust and investment companies have issued yuan financial bonds. In 1991, China Construction Bank and Commercial Bank of China jointly issued a state investment of 10 billion yuan bonds. In 1994, with the establishment of policy banks, government financial bonds also began the birth. 1996, specifically to raise funds for the repayment does not regulate the securities repurchase debt, some financial institutions to begin issuing special financial bonds.
Of the early 1980s began to issue bonds in the international capital market. In 1982, the China International Trust and Investment Corporation in Tokyo, issued 10 billion yen of Samurai bonds. Since then, the Ministry of Finance, Banking and trust and investment companies, the companies have entered into the international bond market, foreign bond and Eurobond issue in Japan, the U.S., Singapore, the United Kingdom, Germany, Switzerland and other countries. Last year, foreign companies and institutions in our issue Panda bonds. The International Finance Corporation (IFC) and the Asian Development Bank in China's inter-bank bond market were allowed to issue renminbi bonds 11.3 billion and $ 10 billion.
At present, China's bond market is becoming more mature and grow. The market has expanded rapidly, the primary market and the secondary market has made considerable development, and further diversification of bonds varieties and maturity structure. Product innovation in 2005, the bond market has made a breakthrough, expanding market stock and bond trading has become increasingly active, a rapid increase in trade subject to further improve the market system and infrastructure. As of the end of 2005, the balance of China's bond market bonds was 7.26 trillion yuan, an increase of 40.61% compared to 2004, is 14 times that of the end of 1997, the balance of government bonds 35,568 billion; 20 inter-bank bond market turnover. 63 trillion yuan, with 2004, an increase of 78.58%, accounting for the proportion of the total volume of China's bond market has reached 90%; institutional investors from the bond market, the 16 commercial banks in 1997 increased to 5,227, of which nearly 3,500 non-financial institutional investors.
However, the development of China's bond market, there are many problems. First, the amount of corporate bond issuance, the number of issued corporate plan distribution, not to decide the issue of corporate bonds in accordance with the laws of the market economy. Such as corporate bonds issued amount is progressively allocated by the government, the state allocated to the provincial level, and then progressively down allocation. Administrative allocation of corporate bonds issued amount, often by "the poor" principle, the amount of corporate bonds as a relief, assigned to the poor quality of enterprises. Second, there is no perfect bond credit rating system, unable to give investors an accurate level of risk considerations, not available for analysis of information disclosure to investors. Administrative pricing and price limit controls. Administrative requirements of corporate debt issuer must have a bank guarantee. Once the bank guarantee corporate bonds in the typical sense will not make itself. Bond issue for retail, not like the practice of international bonds eleven institutional investors, mainly for analysis. Individual investors often lack adequate market analysis, risk-taking ability is also poor. There is no market constraints. Should be determined by the market which corporate bonds issued out, which corporate debt is unable to go, how the price should be, the default will be what kind of consequences. There is no adequate investor education. Many corporate bonds as investors largely storage
Accumulator product variants. Fifth, administrative intervention is more serious in dealing with the issues of non-compliance of the issuer. Enterprises on the issue of breach of contract is usually not constrained by market principles to resolve. The role of the underwriter is not positioned correctly. In the payment of underwriting plan color and Chief intervention also more serious, underwriters must escrow payment, and payment can also be liable. 6 is inadequate laws and regulations. Such as the lack of a comprehensive bankruptcy law. The current bankruptcy law "can not in corporate defaults by" bankrupt "the last means of deterrence to its constraints, the rights of creditors in the bankruptcy law" is often not due protection.
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