The Bond Market in China

Introduction The bond market is a financial market that identifies two different environments. The main markets for members to issue new debt and the secondary market where they can buy and sell bonds. The main purpose of the bond market is to secure long-term financing mechanisms for private and public capital outflows. Traditionally, the global bond market has been dominated by the United States, but now the United States accounts for half of the market (Pike, Neale and Linsley, 2012).

Before explaining the details, the Chinese bond market is another example of a seemingly open market approach. Most of the bonds issued in China are government bonds or government bonds issued to stimulate the economy, which totaled 510 million yuan in the past 4 years (Jingu, 2002, p. 7). According to the National Briefing Session (December 13, 2002, No. 5, 2002), China has been hesitant to establish a stronger bond market as it is concerned about the expected liquidity of share transfer. In anticipation of continuing economic stimulus measures and the maintenance of growth, this will not prevent the government from issuing special government bonds of 140 billion yuan this year (National Report, January 2003 3 days).

In the early 1990s, the bond market was first listed on the stock exchanges in Shanghai and Shenzhen. In 1997, an independent bank-to-bank bond market was established in China (Porter & Xu 2009) in order for commercial banks to ban transactions and transactions at exchanges. Today, most of bond trading is done in the interbank bond market. There are also foreign exchange bond markets in China that individuals and small investors can trade bonds. In recent years, China's bond market has expanded its role in providing equity finance to companies (Figure 6). Generally, all companies in China can issue bonds. Bonds usually provide companies with cheaper financing than direct borrowing from banks. The rapid growth of the bond market is also partly due to barriers to listing on the Chinese stock exchange.

Government securities, central bank bills, financial institution bills and other corporate bonds are traded on the bond market. More than half of the issued bonds are issued by the government, and the rest are issued by state-owned banks (IMF 2011). The stock market was originally established in China in the early 1990's, but at that time it supported only a few large state-owned enterprises with few tradable shares. There are two stock markets in mainland China. Currently, the Shanghai Stock Exchange and the Shenzhen Stock Exchange were officially established in 1990 and operated under the supervision of the China Securities Regulatory Commission. In general, the difference between these two exchanges is that large-scale state-owned enterprises are listed on Shanghai, while small and medium-sized enterprises are listed on Shenzhen.