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Abstract : Bond market is a place for issuing and trading bonds, it is also an important part of the financial markets. Bond market is an integral part of a country's financial system, a mature and uniform bond market constitutes the basis for a national financial markets. Bond market's development plays an important role in the process of marketization of Chinese financial system. The paper analyzed some problems in the bond market and gave some suggestions in developing and perfecting China's bond market at the same time.
Keywords : bond, problem, countermeaures
1.Brief description of the bond market
Bond market is a place for issuing and trading bonds, it is also an important part of the financial markets. Bond market is an integral part of a country's financial system, a mature and uniform bond market can afford low-risk investment and financing tools for investors and fund-raisers in the whole society; bond yield curve is the benchmark of all the financial proceeds of goods in socio-economic level, therefore,bond market is important carrier which can conduct Central Bank's monetary policy.
2.Current situation of bond market's development in China
2.1 Issuing scare rapidly expanded
China 's bond market has experienced several ups and downs in the end of last century, the issuing scale in 1990's was small and the growth was unstable. Since the beginning of 21st century, the issuance scare of China's bond market has enjoyed a rapid growth, especially for enterprise bond market in 2009, showing a trend of rapid development, offering nearly $ 1.6 trillion, increased by 79.66% compared to the same period last year, meanwhile, corporate bonds, especially local government bond also issued nearly 300 times more than ever before.
2.2 Diversification of issuing structure
In the first half of 2009-2010, there have been great changes in China's bond varieties. Floating rate MTN, medium-term notes with terms of redemption terms and accompanied by a back progressive rate, SME collection bills and within dollar medium-term note were in public for the first time in 2009; medium-term bills which issued by guarantee also available for the first time.
2.3 Relative concentration of bond distribution
Government bonds represent a significant advantage judging from the body of the bonds. New bonds issued in 2009 were mostly government bonds while issuance scale of corporate bond was small, so it showed the basic characteristic of "strong government bonds, weak corporate bonds". Most bonds were concentrated in industrial areas in terms of bonds' industry distribution, the proportion reached 39.21%, followed by the financial sector which size was 19.81%. From the distribution area of bond, by 2010, regional distribution of China's bond was generally as: bonds focused on North China reached 38.78%, East China 32.93%, bond markets in less developed central and western regions were more backward. 2.4 Overall bond credit rating higher
China's bond credit rating system has undergone major changes in 2009, this has prompted migration of some enterprise bond credit rating. a total of 94 credit migration happened in 2009, 92 of them increased credit level with only two reduced it, however, almost all bonds were at AA credit level or above.
3.Problems in China's bond market
3.1 Small size of the market
China's bond market still had large gaps
compared to other emerging economies such as the United States and Japan judging from the relative size. At the end of 2009, United States' total bond balance was approximately 1.8 times of GDP, Japan's was about 2.3 times of GDP, France and Korea's were both about 1.1 times of GDP, Malaysia and Singapore were also more than 80%,however, china's was only for 52.5%, less than one-fourth of Japan's, one-third of United States', one-second of France and Korea's, only 60% of Malaysia and Singapore's.
3.2 Lack of liquidity in the market
China's bond market was still lack of liquidity although it was expanded rapidly in recent years, China's bond market's year exchange rate were all below 2.5 from 1997 to 2009, the revenue of interbank managed market reached 11.2452 trillion yuan at the end of 2009 while the trading volume of coupon was 10.9216 trillion yuan a year, annual exchange rate was only 118%. United States' treasury balances reached 4.5436 trillion $ in 2009, trading volumes was up to 180 trillion for the year, furthermore , exchange rate was as high as 46. This indicated that the market's transaction in china was not active.
3.3 Unbalanced development of bond market
The structure of China's bond market was imbalance over the years, government bonds accounted for 60% of the total bond market, financial bonds accounted for around 35%, while corporate bonds was less than 5%.,treasuries and financial bond markets developed faster than corporate bond market, corporate bonds market was particularly lagging behind. China's bond market assets totaled $ 8.7 trillion at the end of 2009, only accounted for 35.3% of GDP that year, well below the levels in mature markets abroad. Chinese bond market structure was also unreasonable, government bonds, policy-oriented financial bonds and the average financial bonds accounted for 90.3% in the total amount of the Chinese bond market at the end of 2009, corporate bonds totaled only 425.233 billion dollars, accounted for 5.2% of the total amount of the bond market, other new products such as asset-backed securities, convertible bonds accounted for only 4.6%. 3.4 Low efficiency of regulation
Operating mechanism of China's bond market was largely controlled by government, so there were more difficulties in operating market mechanism. there are more than one management sector in terms of issuing systems and different departments' approval rules vary greatly, this created different bond issuing approval standards. In addition, corporate bonds' issuing was generally continued to follow the lines of administrative approval system; Lack of liquidity of treasury bonds market and incomplete of the yield curve resulted in lacking of necessary interest rate benchmark in bonds' issuance and trading, these factors impeding the development of the bond market to a certain extent. There are also a lot of problems in terms of bond trading mechanisms. Bond trading was less efficient and high in liquidity costs due to less connectivity among interbank bond market, exchange bond market and the banking counter bond market.
4.Countermeasures and suggestions on perfecting China's bond market
4.1 Increase type of bonds
There is no real sense of corporate bonds in the market in addition to a small amount of convertible bonds in China, the new revision of the company law and securities law almost had no restrictions on corporate-bond issuers. In order to develop corporate bonds we should straighten out the release mechanism and make release conditions according to the market requirements; improving credit rating system, establishing investor voting online rating system, monitoring moral hazard of rating agencies; implementing issue sponsor system, dealers should take on secondary market-making obligations, improving market liquidity as well as controlling moral hazard; accelerating corporate bond's variety innovation, introducing credit, mortgage bonds and floating rate bonds; improving information disclosure and security mechanisms, protecting investors ' interests.
4.2 Improving liquidity of bond market
Major initiatives: first, improving the do-
mestic bond market's micro-structure. Second, improving the situation that investors in domestic bond market were single. Third, building a reasonable exchange rate formation mechanism. Fourth, readjust the tax treatment rationally.
4.3 Cancel strict controls on corporate
bonds
In order to change the situation that corporate bond issuance was too small to meet the needs of enterprise financing conditions, we should not limit the amount of corporate bonds' issuance. The interest rate, financing scale and duration should be based on market interest rates, their own financial situation and financing needs. We can have an appropriate relaxation of approval conditions in issuing corporate bonds under the strict conditions of corporate information disclosure ,these enterprises including non-financial enterprises and private companies, moreover, we should phase out administrative approval system and allow eligible enterprises offering private bonds. 4.4 Adjusting structure of bond market
In order to adjust the structure, it is necessary to vigorously develop the corporate bond market. Second, it is necessary to reform the current management model of corporate bonds, including reforming examination and approval procedures, reducing the administrative control of corporate bonds gradually; Third, it is necessary to draw on lessons from the stock market, reducing administrative intervention on corporate bond market and ensuring a true disclosure of the information.
References:
[1]Ruslan Goyenko, Avanidhar Subrah-
manyam, and Andrey Ukhov. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS[J].Vol. 46, No. 1, Feb. 2011, pp. 111-139
[2] Shengchun Zhu.Comparison of the Convertible Bond Market Development in China and Europe and the Enlightenment, Review of European Studies[J].vol. 1, no. 1, pp. 35-38, 2009.
[3] Kam C. Chan, Hung-Gay Fung and Samanta Thapa. China Financial Research: A Review and Synthesis[J]. GFCB Working Paper Series: V17, Gordon Ford College of Business, Western Kentucky University, 2005.
作者簡介：冀源溪，1988-，女，贵州大学经济学院2010级区域经济学研究生。
詹露，1989-，男，贵州大学经济学院2009级政治经济学研究生。
（作者单位：冀源溪，贵州大学经济学院2010级区域经济学研究生；詹露，贵州大学经济学院2009级政治经济学研究生）
Keywords : bond, problem, countermeaures
1.Brief description of the bond market
Bond market is a place for issuing and trading bonds, it is also an important part of the financial markets. Bond market is an integral part of a country's financial system, a mature and uniform bond market can afford low-risk investment and financing tools for investors and fund-raisers in the whole society; bond yield curve is the benchmark of all the financial proceeds of goods in socio-economic level, therefore,bond market is important carrier which can conduct Central Bank's monetary policy.
2.Current situation of bond market's development in China
2.1 Issuing scare rapidly expanded
China 's bond market has experienced several ups and downs in the end of last century, the issuing scale in 1990's was small and the growth was unstable. Since the beginning of 21st century, the issuance scare of China's bond market has enjoyed a rapid growth, especially for enterprise bond market in 2009, showing a trend of rapid development, offering nearly $ 1.6 trillion, increased by 79.66% compared to the same period last year, meanwhile, corporate bonds, especially local government bond also issued nearly 300 times more than ever before.
2.2 Diversification of issuing structure
In the first half of 2009-2010, there have been great changes in China's bond varieties. Floating rate MTN, medium-term notes with terms of redemption terms and accompanied by a back progressive rate, SME collection bills and within dollar medium-term note were in public for the first time in 2009; medium-term bills which issued by guarantee also available for the first time.
2.3 Relative concentration of bond distribution
Government bonds represent a significant advantage judging from the body of the bonds. New bonds issued in 2009 were mostly government bonds while issuance scale of corporate bond was small, so it showed the basic characteristic of "strong government bonds, weak corporate bonds". Most bonds were concentrated in industrial areas in terms of bonds' industry distribution, the proportion reached 39.21%, followed by the financial sector which size was 19.81%. From the distribution area of bond, by 2010, regional distribution of China's bond was generally as: bonds focused on North China reached 38.78%, East China 32.93%, bond markets in less developed central and western regions were more backward. 2.4 Overall bond credit rating higher
China's bond credit rating system has undergone major changes in 2009, this has prompted migration of some enterprise bond credit rating. a total of 94 credit migration happened in 2009, 92 of them increased credit level with only two reduced it, however, almost all bonds were at AA credit level or above.
3.Problems in China's bond market
3.1 Small size of the market
China's bond market still had large gaps
compared to other emerging economies such as the United States and Japan judging from the relative size. At the end of 2009, United States' total bond balance was approximately 1.8 times of GDP, Japan's was about 2.3 times of GDP, France and Korea's were both about 1.1 times of GDP, Malaysia and Singapore were also more than 80%,however, china's was only for 52.5%, less than one-fourth of Japan's, one-third of United States', one-second of France and Korea's, only 60% of Malaysia and Singapore's.
3.2 Lack of liquidity in the market
China's bond market was still lack of liquidity although it was expanded rapidly in recent years, China's bond market's year exchange rate were all below 2.5 from 1997 to 2009, the revenue of interbank managed market reached 11.2452 trillion yuan at the end of 2009 while the trading volume of coupon was 10.9216 trillion yuan a year, annual exchange rate was only 118%. United States' treasury balances reached 4.5436 trillion $ in 2009, trading volumes was up to 180 trillion for the year, furthermore , exchange rate was as high as 46. This indicated that the market's transaction in china was not active.
3.3 Unbalanced development of bond market
The structure of China's bond market was imbalance over the years, government bonds accounted for 60% of the total bond market, financial bonds accounted for around 35%, while corporate bonds was less than 5%.,treasuries and financial bond markets developed faster than corporate bond market, corporate bonds market was particularly lagging behind. China's bond market assets totaled $ 8.7 trillion at the end of 2009, only accounted for 35.3% of GDP that year, well below the levels in mature markets abroad. Chinese bond market structure was also unreasonable, government bonds, policy-oriented financial bonds and the average financial bonds accounted for 90.3% in the total amount of the Chinese bond market at the end of 2009, corporate bonds totaled only 425.233 billion dollars, accounted for 5.2% of the total amount of the bond market, other new products such as asset-backed securities, convertible bonds accounted for only 4.6%. 3.4 Low efficiency of regulation
Operating mechanism of China's bond market was largely controlled by government, so there were more difficulties in operating market mechanism. there are more than one management sector in terms of issuing systems and different departments' approval rules vary greatly, this created different bond issuing approval standards. In addition, corporate bonds' issuing was generally continued to follow the lines of administrative approval system; Lack of liquidity of treasury bonds market and incomplete of the yield curve resulted in lacking of necessary interest rate benchmark in bonds' issuance and trading, these factors impeding the development of the bond market to a certain extent. There are also a lot of problems in terms of bond trading mechanisms. Bond trading was less efficient and high in liquidity costs due to less connectivity among interbank bond market, exchange bond market and the banking counter bond market.
4.Countermeasures and suggestions on perfecting China's bond market
4.1 Increase type of bonds
There is no real sense of corporate bonds in the market in addition to a small amount of convertible bonds in China, the new revision of the company law and securities law almost had no restrictions on corporate-bond issuers. In order to develop corporate bonds we should straighten out the release mechanism and make release conditions according to the market requirements; improving credit rating system, establishing investor voting online rating system, monitoring moral hazard of rating agencies; implementing issue sponsor system, dealers should take on secondary market-making obligations, improving market liquidity as well as controlling moral hazard; accelerating corporate bond's variety innovation, introducing credit, mortgage bonds and floating rate bonds; improving information disclosure and security mechanisms, protecting investors ' interests.
4.2 Improving liquidity of bond market
Major initiatives: first, improving the do-
mestic bond market's micro-structure. Second, improving the situation that investors in domestic bond market were single. Third, building a reasonable exchange rate formation mechanism. Fourth, readjust the tax treatment rationally.
4.3 Cancel strict controls on corporate
bonds
In order to change the situation that corporate bond issuance was too small to meet the needs of enterprise financing conditions, we should not limit the amount of corporate bonds' issuance. The interest rate, financing scale and duration should be based on market interest rates, their own financial situation and financing needs. We can have an appropriate relaxation of approval conditions in issuing corporate bonds under the strict conditions of corporate information disclosure ,these enterprises including non-financial enterprises and private companies, moreover, we should phase out administrative approval system and allow eligible enterprises offering private bonds. 4.4 Adjusting structure of bond market
In order to adjust the structure, it is necessary to vigorously develop the corporate bond market. Second, it is necessary to reform the current management model of corporate bonds, including reforming examination and approval procedures, reducing the administrative control of corporate bonds gradually; Third, it is necessary to draw on lessons from the stock market, reducing administrative intervention on corporate bond market and ensuring a true disclosure of the information.
References:
[1]Ruslan Goyenko, Avanidhar Subrah-
manyam, and Andrey Ukhov. JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS[J].Vol. 46, No. 1, Feb. 2011, pp. 111-139
[2] Shengchun Zhu.Comparison of the Convertible Bond Market Development in China and Europe and the Enlightenment, Review of European Studies[J].vol. 1, no. 1, pp. 35-38, 2009.
[3] Kam C. Chan, Hung-Gay Fung and Samanta Thapa. China Financial Research: A Review and Synthesis[J]. GFCB Working Paper Series: V17, Gordon Ford College of Business, Western Kentucky University, 2005.
作者簡介：冀源溪，1988-，女，贵州大学经济学院2010级区域经济学研究生。
詹露，1989-，男，贵州大学经济学院2009级政治经济学研究生。
（作者单位：冀源溪，贵州大学经济学院2010级区域经济学研究生；詹露，贵州大学经济学院2009级政治经济学研究生）