Integration Of Chinese Bond Market And International Bond Market

With the development of economic globalization and financial liberalization, the integration between Chinese capital market and international capital market is increasing. Chinese bond market has a rapid development in recent years, which has become an important part of Chinese capital market. In 2014, more and more foreign investors have participated Chinese bond market. Foreign non-financial enterprises firstly issued RMB bonds in Chinese bond market. VanEck Global successfully issued the first ETF products, focusing on Chinese bonds, on the NYSE. All these facts implicate that Chinese bond market has an increasing integration with the international bond market.This paper will focus on two aspects of Chinese bond market, the risk resources of Chinese bond market and measuring the degree of integration. In this paper, we use daily frequency data covering the period from Dec 1,2011 to Mar 7,2015 and adopt conditional CAMP model proposed by Bekaert and Harvey(1995). We analysis the risk resources of Chinese bond market excess return, international market risk and domestic market risk. We will measure the degree of the integration while estimating these equations.Our results show that Chinese bond market is partially integrated with the international bond market and the integration degree is low. The main risk resource is domestic market risk, which affect Chinese bond market excess return significantly. The index of degree of integration,?w, is merely 0.294, which show that Chinese bond market' integration is lower compared with similarly countries.Chinese capital market will experience deeper reformation in future years, which will promote the development of Chinese bond market.