A Research On The Development Of Asian Bond Market

East Asia Financial Crisis swept over the whole Southeast Asia and then gradually diffused to some countries in Northeast Asia since its rise in Thailand in the latter half of 1997, casting a wandering shadow over this once miracle-wrought East Asia land. It has produced a profound impact on the diversified economic patterns of the countries concerned, on the economy of East Asian Region as a whole, as well as on the world economy. This crisis helped those immersed in the optimism of"East Asia Miracle"gain a full recognition of the importance of strengthening the inter-regional financial cooperation. All facts mentioned above indicate that it is an inevitable trend to erect and develop the Asian bond market and reinforce the region-wide financial cooperation when the trends of economic globalization and financial liberalization are in full swing. This paper aims at offering solutions to two problems: one is to make an over-all analysis of all the problems that can be encountered in developing the regional bond market and to put forward certain brilliant strategies for actual use; another is how China participate in the regional bond market cooperation when facing the progress of regional financial cooperation and the backwardness of its domestic bond markets.The paper falls into six sections:Section I is the introduction. This section includes five parts. They are: the advancement of the main issues, the clarification of the core definitions, a summary of literature on the development of Asian bond market, the structure of the paper and studying approaches, as well as the innovations and insufficiencies of the paper.Section II gives a panorama of the situation of Asian bond market. Firstly, it reviews the development process of the Asian bond market by taking the East Asian financial crisis as a dividing line with its focus on the Asian bond market after the financial crisis. East Asian economies have proposed to develop the Asian bond market in succession after the crisis, which give rise to a series of dialogues, conferences, cooperation mechanisms and fields. This part studies this process in chronological order. Secondly, the paper comprehensively analyses the present situation of the Asian bond market from three aspects, which are the scale and the structure, the market mobility and the degree of integration. Thirdly, the paper summarizes the formation, the development and the significance of Asian bond funds and holds the view that Asian bond funds are a phase of system innovation during the developing process of the Asian bond market.Section III depicts the driving mechanism for developing the Asian bond market. Firstly, the driving force to develop the bond market mainly comes from the market itself. By analyzing the supply side and demand side on the Asian bond market, we believe that the market has its own dynamic support for development. Secondly, East Asian financial crisis highlights the imbalance of the financial system of East Asia. Therefore, through analyzing the present situation of East Asian financial system, the reasons of imbalance and its impact, we can conclude that we should develop Asian bond market to perfect the financial system at the present stage. Thirdly, the theoretical field pays more attention to the regional financial cooperation due to the outbreak of Asian financial crisis and the implement of euro. However, the region's financial cooperation has been developing slowly owing to various reasons. Compared to other areas of the financial cooperation, it needs East Asian economies transferring relatively little rights to develop the regional bond market, so that the development of the Asian bond market becomes the breakthrough point of the regional financial cooperation. The imbalance of global economy is increasingly severe; therefore, how to solve this problem is presented on the agenda. And the development of Asian bond market can contribute to solve this problem, which highlights the importance of developing the regional bond market.Section IV dissects the constraints of developing the regional bond market. The initiative to develop the Asian bond market has been proposed for many years, but the development of the market is extremely slow, especially after the introduction of the Asian bond funds. This part analyses the impediments of the regional bond market from the aspects of political, economic, financial and infrastructural environment. Firstly, from the view of regional political environment, we believe that East Asian economies take different purposes respectively toward the development of the regional bond market. At the same time, owing to some historical reasons, East Asian economies cannot trust each other, thus further hinder the development of the regional bond market. Then from the aspect of political environment outside of East Asian area, America will impede the development of the Asian bond market in order to safeguard its interests here. Secondly, several factors have hindered the development of Asian bond market. These factors include the different economic developing levels, the constraints on capital flow and the slow progress in the area of the cooperation on exchange rates among the East Asian area. Thirdly, the most important thing is that most bond markets in the East Asian economies have developed unequally which have greatly hindered the development of the regional bond market. Meanwhile, the East Asian economies hold different ideas toward choosing which currency to issue Asian bond. This dispute has largely constrained the development of the regional bond market. Fourthly, the underdevelopment of the financial infrastructures in the area has greatly hindered the development of the regional bond market. These infrastructures include regional credit rating agency, clearing and settlement system, law system and so on. In addition, the regional bond market also was hindered by the weak foundation of the institutional investors.Section V proposes a series of strategies for developing the Asian bond market. Firstly, it makes out the overall path for developing the Asian bond market. In the initial stage, we should focus on the construction of bond markets and continually improving the banking system in the East Asian economies respectively. Only in this way, can we provide a sound regional financial system for Asian bond market. In the medium term, we should actively carry out the bilateral cooperation within the regional economies, and constantly improve the regional infrastructure. At the same time, we should actively promote other areas in the regional monetary and financial cooperation, so that these different areas can help each other. In the long term, on the basis of bilateral cooperation, we should gradually push forward to multilateral cooperation until achieving the integration of regional bond market. Thereafter, the paper analyses and discusses some specific aspects of regional bond market. These include the specific measures for improving the bond market of East Asian economies, the unification of infrastructure in the regional financial market, the fostering of regional institutional investors and the regulatory coordination of the regional bond market.Section VI studies the Asian bond market from the view of china. As a great power in East Asia, regional financial cooperation cannot achieve without China's participation and efforts. Meanwhile, with the development of regional economic and financial integration, the development of China's economy also cannot be separated from the regional environment of East Asia. Firstly, this section analyses the role and influence of China in the development of regional bond market. Then it points out the opportunities and challenges China will meet in the developing process of regional bond market. Finally, it studies the path of China's participating in the regional bond market. The author believes that China should gradually loosen the control over the capital account and fully utilize the advantages of the international financial center of Hong Kong. At the same time, China should actively develop bilateral cooperation with other East Asian economies; especially foster the formation of the"Greater China"bond market and other unified bilateral bond market.