Corporate Bond Market Research In China

The emergence of corporate bonds is a product of our national reform and opening up. At that time ,the effective demand was rising, businesses had more power to expand production. But because of strict government controls, restrictions on bank loans, businesses lacked of access to financial support. Based on this situation, the corporate bonds came into being.The development of corporate bonds in China has experienced four major phases. The first stage is the embryonic stage. Bonds at this stage is complete spontaneous behavior, the Government has not introduced any legislation to regulate the market, but it had a positive impact on business. The second stage is a stage of rapid development, the Government has introduced a《Provisional Regulations on the Management of corporate bonds》in 1987, it is the beginning of control to the corporate bond market. This stage is characterized by a rapid increase in the size of the market. The third phase, from 1993 to 1998, is the stage of government control. Because the management system was not sound , a lot of low-quality enterprises came into corporate bonds market, resulting in confusion in the market of corporate bonds, management measures were introduced to regulate. Development of bond market began a concussion. The fourth stage began from 1999. Because the original "Regulations of corporate bond market," clearly did not meet China's economic development and corporate financial requirements, National Reform and Development Commission began to develop a new "management of corporate bonds" since 2000.But so far, the new regulation has not yet issued. Issues of corporate bond market need urgent solutions.Now, a lot of questions exist in China's corporate bond market, but the biggest drawback of the system is the government control. As long as we straighten out this problem, many other questions can be resolved. Overall, the system problems of China's corporate bond market exist in the following aspects:(1) In distribution system, the government controls are too strict, limiting the free development of corporate bond market, and unable to meet market needs. At present, qualifications, distribution lines, sales, interest rates determine and the use of funds are all limited, leading to the small size of corporate bond market and weak mobility.(2) In trading system, China carry out strictly limit on enterprises listing, making a lot of corporate bonds in circulation can not be listed. Even a small number of bonds are eligible for listing, because of the lack of over-the-counter trading market and market maker system, they still face many restrictions on the transaction. In addition, most investors are individuals, not institutional investors, although the country in recent years allows some insurance companies to participate in corporate bond investment, but still unable to reverse the situation of the imbalance structure. This is not good for the stability of corporate bond market. In information disclosure, China lacks a disclosure system, after investors buy the bonds, they are no longer able to access any corporate information.(3) Lack of a sound credit rating system. China's credit rating system began with the emergence of corporate bond market. Because rating agencies depend on the corporates economically, rating results are not objective. And at the technical level, the rating system lacks unified standard, the ratings given by different agencies are not comparables. In addition, the ratings of our country can not change with business conditions. Finally, our country's credit rating industry lacks self-regulatory organizations and law.(4) In China, strict supervision exists in the corporate bond market for a long period, the People's Bank, State Planning Commission, the Ministry of Finance control such as the issuance of corporate bonds, the interest rate, listing, etc., it is prone to cause unclear responsibilities and inefficiency.Because of the above questions, the efficiency of China's corporate finance and social capital configuration is low, corporate bond market can not meet the needs of the economy. Our country must reform the system of corporate bond market to solve these problems:(1) in the distribution system, the original examination and approval system should be replaced by popular approval system. Enterprises which meet the requirement of regulatory authorities have the right to determine the amount, distribution, etc. The interest rate should be determined by the market. Introduce bonds of different duration, different ways to repay the bonds to make the market more active.(2) In the trading system, set up the OTC market and the market maker system to enhance the liquidity of corporate bonds, thereby increasing the attractiveness for investors. Remove the restrictions on investors. The introduction of various types of institutional investors would make the corporate bond market more rational and stable. The government should set up information disclosure system in order to avoid the lack of decision-making basis for investors.(3) In the credit rating system, the first thing we should do is integrating the system, which makes the credit rating agencies independent completely. Then set up dynamic assessment system. Rating agencies should continue to track the status of the enterprise and adjust the rating result after providing the first one. Set up a credit rating association which can provide coordination and guidance for the rating agencies. Also, formulate law to control the rating industry.(4) In the aspect of regulatory system, the government can set up a dedicated regulatory authority which will be responsible for corporate bond issuance, transaction management, etc., and this authority should cooperate with other regulatory authorities.