China has completed the amendment of the regulations on enterprise bonds and
will launch the new rules soon, according to Securities Daily.
Insiders said the China Securities Regulatory Commission (CSRC) will replace the
National Development and Reform Commission (NDRC) to supervise
the bond market.
said supervisory power transfer means China's securities market are heading for
"We should focus on developing the corporate bond market and expand direct
financing," said CSRC vice chairman Gui Minjie recently.
"Conditions are basically ripe for developing the corporate bonds market,"
added another CSRC vice chairman Tu Guangshao.
China's bond market lagged behind the domestic stock market. Statistics show
that, by the end of 2006, a total of 5.75 trillion yuan (US$743.86 billion) of
bonds were issued, accounting for 27.44 percent of China's gross domestic products (GDP) last year, far lower than 163.11 percent, the average in
developed countries. This is also far below the proportion of China's stock
market value to the GDP.
By the end of 2006, national debt, financial bonds and corporate bonds made
up of 50.56, 44.19 and five percent respectively of the total bonds issued. Only
283.1 billion yuan of corporate bonds were issued by the end of last year,
accounting for only 1.35 percent of the GDP.
Insiders say the slow pace of the corporate bond market was due to overlapped
supervision and inefficient management systems. In the primary market, corporate
bonds must be approved by NDRC and the convertible bonds must be approved by
CSRC; in the secondary market, CSRC must supervise the exchanges and the central
bank controls the inter-bank markets. The complicated approval system restrained
the development of the bonds market.
Currently, the government is doing public consultation on a new bond issue
system, including a checking system and a sponsor system.
China will allow more enterprises, including some small- and medium-sized
enterprises to issue corporate bonds; it will also encourage multinationals,
which have investments in China, to issue renminbi bonds and invest in projects in China, according to
the revised regulations.
Meanwhile, the new regulations allow enterprises to issue, buy and sell bonds
in inter-bank markets.
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