The Establishment And Development Of The Asian Bond Market

East Asia Financial Crisis, which swept across 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, has produced a profound effect on the diversified economic patterns of certain countries concerned, on the economy of East Asian Region as a whole, as well as on world economy. The outcome of this crisis is of much help to those immersed in the optimism to gain a full recognition of the importance of strengthening the inter-regional financial cooperation, meanwhile, when being awash in the crisis, a sharp awareness of the vulnerability of a financial system having been dependent for long on the inflowing of foreign capital and the bank credit in every country and region of Asia. All facts mentioned above turn out that it is an inevitable trend to reinforce a region-wide financial cooperation when economic globalization and financial liberalization trends are in full swing. This paper aims at giving solutions to two problems: one is to make an over-all analysis of all problems that can be encountered in establishing and developing the regional bond market and to come up with certain brilliant strategies for actual use. Another is how China gets itself involved into the financial cooperation when it faces up to the progress of regional integration and backwardness of domestic bond markets. The paper falls into six sections: The first section is preface, which consists of the research backgrounds, purposes and approaches. The establishment and development of the Asian regional bond market are both the inevitable result of the development of the Asian economy and the necessary request of establishing regional risk guard mechanism to resist the financial crisis. Although some domestic economists have achieved somewhere on the research about the establishment and development of the Asian regional bond market, there are a small literature involving the thorough and comprehensive research of this topic. The further analysis goes as follows: firstly introduces the status quo of the world bond market and draws experience from the developed countries'bond markets; next analyses the necessity and feasibility of the establishment and development of the Asian bond market; then dissects the existing impediments in the process of establishing and developing of the regional bond market and proposes the countermeasures and strategies to solve them; fourthly studies the impact of the establishing and developing of the regional bond market to China and in which way should China choose to participate in the establishment of the regional bond market; finally obtains the conclusion of this paper. The methodologies adopted are dynamic analysis, historical analysis and induction contrasts. The second section firstly studies the present situation of the world bond market and summarizes the characteristics of the world bond market these days. Meanwhile, it uses the developed countries'experiences and lessons for reference to accelerate the establishment and development of the Asian bond market. There are many aspects which deserve us to learn, such as the developing sequence, the different kinds of bonds, the interest system, market infrastructures, the credit rating and regulatory system and so on. I hope to obtain useful enlightenment from them for establishing and developing of the Asian bond market. The third section emphatically analyses the necessity and feasibility of the establishment and development of the Asian regional bond market. Through analyzing the necessity of the establishment and development of the Asian regional bond market, we can conclude that not only from the perspective of adjusting the regional financial system, eliminating the detrimental effect ofdollarize to the Asian region, improving the situation of Asia in the distributing pattern of the international interest but also from the aspects of developing the cooperation in the currency and exchange rate, achieving the scale profits from the regional bond market, reducing harmful influence of the international capital flowing, the essential method for guarding the future financial crisis are to press forward with the establishment of the Asian regional bond market and strengthen the financial cooperation among regional members. When I discuss the practicability of establishing and developing of the regional bond market, I carry on the analysis from the aspects of supply and demand of bonds by combining the realistic situation of the Asian economies'bond markets. The analysis points out that on the demand side, there is a very sizable accumulation of foreign exchange reserves and a higher saving rates in the Asian region which generate strong investment demand for bonds, so it is beneficial to establishing and developing of the regional bond market. Whereas, on the supply side, although the supply of high grade bonds are seriously insufficient, there have been a series of financial tools to enhance the supply of bonds which was put forward by experts, so the initial strive to establish the Asian regional bond market is practical in the present stage. The fourth section dissects the existing problems in the process of establishing and developing of the Asian regional bond market on the foundation of the above analysis and draws experience from the developed countries'bond markets to solve some of the problems in the Asian regional bond market. There are a large amount of impediments to establish and develop the regional bond market. For instance, there are great differences in the development of economy and the developmental level of the financial system, most of the developing members'domestic bond markets are still underdeveloped in the Asian area, they don't have the unified law framework, accounting standard and taxation standard, simultaneously the credit rating of the Asian economies is somewhat low. So it is difficult to establish awell-functioning regional bond market in the near future. It is determined by the above factors that the establishment and development of the Asian regional bond market is not without any obstacles. On the contrary, it should be a long and gradual process. In view of the fact that the domestic bond markets of the Asian economies are almost all underdeveloped, therefore the Asian economies should emphasize the development of it in this period. As to the development of national bond market, they should first foster the government bond market, then the corporation bond market, and finally cultivate different kinds of institutional investors and positively reform the domestic financial system. During the development of the national bond market, the Asian area should energetically foster the regional infrastructures of the bond market, including cultivating the regional credit rating agency, the regional clearing and settlement systems and setting up the regional credit guarantee mechanisms and so on. In addition it is necessary to promote the bilateral cooperation at the stage to lay a solid foundation for the development of regional bond market under the instruction of multilateral framework. The fifth section mainly studies what choice should be made by China when it is confronted with the establishment and development of regional bond market. The development of China domestic bond market is rather lagging, simultaneously there is strict surveillance on the capital account so far. All these problems are the barriers for China to participate in the regional bond market, so in the short term, China only can benefit a little from joining the construction of the regional bond market. But China shouldn't linger at the edge of the establishment and development of the regional bond market, hesitating to move forward. Because of attending the establishment and development of the regional bond market, China can benefit a lot in the long run. It will improve the status of China in the Asian area and accelerate the internationalization of RMB. Therefore, according to the realistic condition of domestic bond market, China should actively consummate the domestic bond...