On The Causes Of The Underdevelopment Of China's Corporate Bond Market And The Approach Of Its Improvement

Instruments of direct financing for corporations consist of stocks and bonds. Corporations abroad generally prefer bonds to stocks when making their choice, while the Chinese ones are partial to stocks, resulting in the underdevelopment of China's corporate bond market. Having introduced the theory of corporate bond financing, this paper firstly compares the corporate bond markets at home and abroad and pointed out that the China's market lags behind the progress of the market economy, especially when compared with the other parts of its capital market. Then the author analyzes the causes of the underdeveloped domestic corporate bond market in view of the respective behavior of the government, the corporations , the investors and the intermediaries against the economic background at home. The author's conclusion is that it is this background that makes the government place priority on the stock market and ignored the bond market in its strategy to develop the capital market. In turn, this results in some systemic imperfection of China's corporate bond market, which further twists the behavior of the corporations, the investors and the intermediaries as participants in the market. Because of their twisted behavior, direct restrictions exist to the sound growth of China's corporate bond market. Finally, after a brief review of the necessity and opportunities to taster China's corporate bond market, the author puts forward practical suggestions in terms of the approach to speed up the development of this sector of the home capital market.