Gov't considering bond system improvement ( 2003-08-11 08:54) (China Daily)
China will further develop the
bond market to deepen the structural reform of the financial industry, an
official with the central People's Bank of China said.
Since China initiated reforms and opening up in 1978, the government has been
continuously improving the nation's financial structure and creating a number of
financial products.
But the country's financing system, which relies heavily on indirect
financing or bank loans, continues to play a leading role, the central bank
official said.
The government will have to give key attention to the development of the bond
market, he said.
During the first half of this year, the Ministry of Finance issued treasury
bonds worth over 314 billion yuan (US$37.8 billion), an increase of 20.8 per
cent compared with the same period of last year.
Relevant departments also issued policy financial bonds worth 138 billion
yuan (US$16.6 billion) during the period, a year-on-year increase of 30.8 per
cent.
Companies issued 6.5 billion yuan (US$783 million) worth of corporate bonds
during the period, a drop of 13.3 per cent.
Zhang Liqun, a senior researcher with the State Council's Development
Research Centre, said China's bond market is lagging behind developed countries
in terms of supply.
By the end of last year, the outstanding amount of the bonds, including
treasury bonds, policy financial bonds and corporate bonds, accounted for 34.22
per cent of the year's gross domestic product.
The ratio was about 100 per cent in developed countries, he said.
The structure of the bonds market was also irrational, Zhang said.
Treasury bonds and policy financial bonds accounted for a majority part of
the market, while corporate bonds accounted for quite a small proportion, he
said.
Dong Chen, a senior analyst with China Securities, said the government should
better design the bonds mix, since the market lacks short-term bonds (no more
than one year).
"The long-term bonds can help avoid the peak time of repaying the debt, but
short-term bonds are beneficial to increasing liquidity of the bonds market,''
he said.
A central bank official said the future goal for development of the bonds
market is to establish a united market for all financial institutions, companies
and individual investors.
Presently, bonds markets consist of inter-bank, exchange and commercial bank
counter bond markets.
The supply for markets will also be increased, the official said.
"Commercial banks will be allowed to issue financial bonds, while more
companies will be allowed to issue corporate bonds,'' he said.
He added that the market conditions will be improved, and the fluidity on the
secondary bond market will be increased, the official said.
In order to meet the needs of non-government organizations to issue bonds, a
regularized, transparent and fair credit system will be established, he said.
The bond trusteeship system and bond settlement system will also be
improved.
