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China's corporate bond market: the plight of Thinking

Author: DingZhiYong From: www.yourpaper.net Posted: 2009-04-01 04:07:08 Read:
[Abstract] corporate bond market as an important part of the financial markets, the development lag has become China's economic system and the reform of the financial system around the past Hom. Article that should gradually push the reform of the management system of China's corporate bond issuance, the abolition of restrictions on the main issue of eligibility, amount of issue, the issue of interest rates and debt issuance purposes, the establishment of corporate bond issuance management operation of the market mechanism to promote the corporate bond market further development, play an important role in China's economic construction should.
[Keywords] corporate bonds; corporate bond market; distribution system; market mechanisms

Starting from the inherent requirements of the development of the socialist market economy, construction adapted to the capital market system, is an important task for China's economic and financial reform, the corporate bond market is crucial. Vigorously develop the corporate bond market in recent years warm air blowing frequency, expressly to be an active and steady development of the corporate bond market in 2004 promulgated the "State of nine"; the end of 2005, central bank governor, Zhou Xiaochuan, China's bond market summit " made a positive discussion on the development of the corporate bond market in China; Party Plenum adopted the Outline of the 11th Five-Year Plan "proposed" positive development stocks, bonds and other capital markets. This indicates that China's corporate bond market will usher in a breakthrough development, on the other hand means seriously lagging behind the development of the corporate bond market at this stage, and the determination of the Government to develop the corporate bond market.

First, the status quo of China's corporate bond market development

The current development of China's corporate bond market, far from being able to keep up with the needs of the situation, relative to government bonds, financial bonds, the stock market, the corporate bond market in China's securities market, and even the financial markets "lame legs" and "short board". In recent years, corporate bond issuance in 2005, the highest year, 654 billion, but the average annual balance of corporate bonds in the proportion of the total bond balance is only about 3%, which means that the proportion of government bonds and financial bonds up to 97 %, compared to the amount of stock issuance, corporate bonds there are the growing danger of being marginalized. From the international comparison, the scale of China's corporate bond market and the Western developed countries there is a big gap between both the high savings rate in Europe, or focus on investments in securities, corporate bonds in the society as a whole financing structure occupies not or lack of status, such as the 2003, the issuance of corporate bonds in the United States amount to about $ 743.6 billion. Point of view, the balance of China's corporate bonds to GDP ratio from the balance of corporate debt to GDP ratio is also grossly under, statistics show that the end of 2004, China's balance of corporate bonds equivalent to only 0.9% of GDP, the same year the amount of the financing of the U.S. corporate bond market The proportion of GDP to 11.4%. Varieties of corporate bonds in China, especially in derived varieties are scarce, the term structure owes rich, the interest payment is not flexible, the lack of market liquidity, low turnover.

Second, the development of China's corporate bond market constraints

China's current economic background and the Government's various institutional arrangements is the root cause of the corporate bond market is underdeveloped. China is in a period of economic transition, the main purpose is to develop the securities market enterprises, joint-stock reform, the establishment of a modern enterprise system, the government ignored the corporate bond market to optimize resource allocation function, from the bias of the stock market and bond market development policy, implemented strict controls on corporate bonds in the system. Concrete is mainly manifested in:

1. Corporate bond issuance plan flatted amount of examination and approval system. Implementation of the examination and approval system can indeed be effective to curb corporate bonds similar wave of collecting funds in 1992 to bring the vicious expansion, but with the changes in the economic and financial environment, it is no longer meet the inherent requirements of the corporate bond market, severely restricted the supply and demand in the corporate bond market both market demand is an important reason that at this stage the corporate bond market small-scale. In addition, the examination and approval system responsibility and risk to the competent authorities concentrated, but not very comprehensive grasp of the department in charge of market risk.

2. Interest rate controls on corporate bond issuance. According to the management of corporate bonds issued in 1993, 18 of the Ordinance provides that: "The corporate bond interest rate shall not exceed 40% of the savings and time deposit rates of banks the same period of the residents, in order not to affect the issue of the national debt, its interest rate shall not stipulated by the State Council Treasury bill rate during the same period, but with the development of the corporate bond market, this upper limit has exposed many shortcomings., bank savings rate over the same period can never serve as a benchmark interest rate of corporate bond issuance, if so reference will bring the unreasonable pricing. interest rate cap of 40% largely limited corporate bond interest rate elasticity and can not distinguish between the different companies, different credit rating of the issuer in order to attract investors tend rates in provisions the upper limit of the so-called "do not low." This makes the risk of different bonds convergence of interest rates, the result, the investors can not judge corporate quality is good or bad depending on the corporate bond rates. mandatory interest rates on corporate bonds, both contrary to the risk and return is directly proportional to the operation of the market mechanism, resulting in high-quality corporate issuers bonds of high costs, the enthusiasm of enterprises to issue bonds hit third, corporate bonds, interest rate controls with the circulation market yield level large deviations reality often upside down interest rates and restrictions on interest rates for fixed-rate maturity debt service set (other pricing and interest-bearing bonds did not exist), and thus has many limitations. fourth , interest rate controls that do not reflect the supply and demand situation of the market capital and the level of creditworthiness of the issuer, nor dependencies form a benchmark Treasury rates, so that every time the market environment changes, we can make the issuance of corporate bonds stalled short under the strict control of interest rates, the corporate bond market, lack of energy and space.

3. The main issue of corporate bonds and distribution conditions. Corporate Bond Management Ordinance promulgated in 1993, and the newly revised Company Law "on the main issue of corporate bonds and conditions are made more stringent restrictions. From the main view of the actual issued bonds are basically the central corporate and municipal background, and is largely concentrated in the transportation, water, electricity and energy, telecommunications and other infrastructure industries, many private enterprises, foreign-funded enterprises and private enterprises financial institutions and non-policy is virtually deprived of the right financing through the issuance of corporate bonds, and contrary to the principle of equality of the enterprise, is not conducive to fair competition among enterprises. Strict control on the main issue and the conditions of issue, is not conducive to the expansion of the issuance size is difficult to match the supply and demand of corporate bonds, resulting in the imbalance between supply and demand in the corporate debt market, and also restricting the number of enterprises with development potential direct financing needs can not be effective solve many better qualified SME financing issues, the corporate bond market, it is difficult to get a real development.

4. Restrictions on the use of the issuance of corporate bonds financing gold. Article 20 of the Ordinance provides that: corporate bonds issued by the finance gold should be used for the production and operation of enterprises in accordance with the approval of the authorities use, shall not be used for real estate trading, stock trading and futures trading has nothing to do with the production and operation of the enterprise risk investment. The Companies Act also provides: the issuance of corporate bonds financing payments must be used for purposes not approved by the authorities to make up for the losses and unproductive expenditures. China's restrictions on the use of the corporate bond issuance by financing gold should be developed in a specific environment, in order to prevent enterprises to issue bonds in the market speculation. Now, with the improvement of enterprise system construction and innovation of all types of market development, this mandatory has become anachronistic.

5. Impose a 20% tax on interest on personal investment in corporate bonds. Impose a 20% income tax on interest directly reduce the income of bond investors, is not conducive to attracting investors to invest in corporate bonds, and have a greater impact and affect the investor gains tax on bond prices, investors bear a certain amount of interest rate risk, bond interest rates may be lower than bank deposit rates. Corporate bond prices inversion phenomenon is widespread reality, so that investors damaged, which is not conducive to long-term development of China's corporate bond market.
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