On China's corporate bond market, calling for "breach of contract bonds."

China's bond market resumed the issue of treasury bonds from 1981 to the present, through twists and turns to explore, now entered a stage of rapid development. In addition to traditional government bonds, central bank bills, financial bonds, the People's Bank in 2005 launched a short-term inter-bank market financing tickets, breaking the dominance of corporate bonds, ordinary corporate bonds as the main sharp rise in the number of start, greatly promoted China's bond market, the market process. In 2007, China Securities Regulatory Commission introduced a corporate bond and convertible Bond trading based on the introduction of detachable bonds and exchangeable convertible bonds, the NDRC began to relax regulation of corporate bond issuance .2008, re-launched the People's Bank of more market-oriented mode of operation of medium-term notes. In addition to credit assets and corporate assets to support the issuance of asset-backed securities also began to develop since 2005. As a result, corporate debt financing instruments directly from a single corporate bond spread to short-term bonds, medium term notes, corporate bonds, corporate bonds, convertible bonds and diversified asset-backed bonds coexist. At present, the formation of the inter-bank bond market, market, exchange market and commercial banks are three basic sub-counter market, including a unified market stratification of the market system. Among them, the inter-bank bond market, the market is the absolute subject, the stock and bond trading volume of the total market share of 90% or more.

As of the end of 2008, the stock of bond market reached 15.11 trillion yuan, an increase of 2.78 trillion yuan, up 22.5% of its market value accounting for 50% of GDP, of which corporate bonds in the main share of total debt stock to 11.6 %, compared with 2007 increased by 2.3 percentage points. the issue size, in 2008 the main enterprises of all types were issued throughout the year a total of 480 bonds, totaling 1.0848 trillion yuan, compared with the year 2007 issue size increased by 60.9% which with the largest circulation for short-term financing bills, issued a total of 269 throughout the year, totaling 434.4 billion yuan, an increase over 2007 29.7% followed by corporate bonds, the annual circulation of 87, totaling 257.4 billion yuan, an increase over 2007 50.6% the third medium-term notes, issued a total of 41 throughout the year, a total of 173.7 billion yuan scale. Compared with the previous three, only in the exchange market, corporate bond issuance and trading of bond investors because the market exchange reasons for lack of scale, since its inception in 2007, the issue size has been small, the year 2008 issued a total of 15, the total issue size is only 28.8 billion yuan.

Since 2009, the bond market in the wave of economic stimulus, especially in the State Department, "Financial 30" bond issue to expand the scale of positive development of corporate bonds, corporate bonds, short-term financing bonds and medium-term notes and other debt financing instruments, policy driven, their access to further development this year in late July, the stock of bond market reached 15.95 trillion yuan, up 840 billion yuan over the beginning of which the main corporate bonds accounted for a substantial increase, from 1 July, only short-term financing securities, corporate bonds and medium-term notes issued on the total bond issue size of 21% compared with 2008 increased by 9 percentage points as of July 31, 2009, does not include $ 1 billion in oil medium-term notes, only the inter-bank market on the medium-term notes and short-term financing bonds on the balance of the stock exceeded 1 trillion yuan, up 1.03081 trillion yuan. domestic enterprises through the bond market to finance the total size of the present trend of rapid growth, the development of corporate bond market has made considerable progress.


Showing characteristics of high credit rating before 2004, the main issue of China's bond market is mainly the central government, central banks and policy banks, corporate debt financing instruments directly to corporate bonds only one. Was basically all corporate bonds guaranteed by the bank, bond's credit rating is basically the same as a bank guarantee for the bond's credit rating, but does not depend on the level of the issuer's own credit, so before 2004 corporate bonds issued by credit rating of AAA and basically all of the beginning of 2004 when , corporate debt financing instruments gradually increased from 2004 to securities companies began to issue financial bonds to be approved, commercial banks, subordinated debt, general financial bonds, financial institutions were in 2004 and 2005 began to appear at the same time, short-term financing securities began in 2005, a large number of release, the release of its market-oriented approach to promote the Chinese market, the bond market process, including corporate bond issuance and the guarantee model of major regulatory changes, as well as corporate bonds and medium-term notes have appeared. This bond issue has expanded rapidly in recent years, the main issue is increasing rapidly. In addition, because monitoring for the bond issue guaranteed to relax, especially in October 2007, the CBRC restrictions on commercial banks to guarantee corporate bonds after the real start of debentures appears, release the level of the main credit bond credit rating has become the primary decision factor. coupled with a substantial increase in the main issue, debt and issuer credit rating of the subject began to appear a certain degree of differentiation, non-AAA-rated bond issuers to gradually enter the bond market.

However, the main issue corporate credit rating distribution can be seen, the high credit rating is still high-grade corporate bonds issued mainly. Short-term financing bills, for example, as of late July 2009, nearly all published only in the short-term financing bonds, short-term debt financing bills itself as the highest rating level of all the AAA level; The main issue rating of AAA grade level accounted for 17%, AA level (including AA +, AA, AA-, the same below) accounted for 63%, the lowest for the A level (including A +, A, A-, the same below) accounted for 20%, AA-level and above accounted for up to 80%, A level and below only appeared two, for the BBB + level due to short-term financing bills in one year and are less than one year, long-term bonds, credit risk is relatively low, so even if the issuer's long-term issuer credit rating is low, but also get a higher grade debt rating, but 20% of the proportion of A-level and below the main business show moderate levels of credit issuers have access to the bond market financing opportunities, this proportion was significantly higher than 6% of corporate bonds.

Short-term financing bills introduced huge success spawned corporate bonds and medium-term notes have appeared. Corporate bonds and medium-term notes taken from a launch that the relative distribution of market-oriented way, no mandatory requirement for the bond guarantee, the bond credit rating is also No mandatory requirements, but because many institutional investors to buy bonds on the level of a regulatory or internal risk control requirements, the company issued bonds and medium-term notes continue to be mainly high-grade bonds. One medium-term notes issued from the beginning to the end of July 2009, the main issue of accounting for long-term AAA-rated 71%, AA-level accounting for 29%, A is not below the rank, while the proportion of AAA-rated debt, compared with 73% AA level of 27%. the small number of corporate bond issuance has been largely due to AA grade and above grade-based.

And corporate bonds from January 2000 to the end of July 2009, the main issue AAA-rated share of 40%, AA-level accounting for 54%, A-level accounting for 6%, BBB is only one; while the proportion of AAA debt rating 72%, AA-level accounting for 28%, A + grade with only two.

In sum, because China has been the height of the strict supervision of the bond market, especially for bond default risk is extremely sensitive, even if the bond market in recent years with the accelerated process of market-oriented, non-AAA-bonds are increasing in number and size , bonds widening scope of the subject, the bond issuer's credit rating and credit levels are more diverse, but the issue of high-grade bonds and high-grade corporate bond market in China is still the absolute subject.


Problems caused by the seven Chinese high-grade corporate bond market to issue bonds, the main body and the distinctive characteristics of high-grade, in the early development of a certain rationality, but also the mode of administration of the bond market, the competent authorities of the rational choice.

Although the July 24, 2006 as Fuxi Investment company was involved in illegal loans from the Shanghai social security fund, the company's short-term bonds issued by "06 Fuxi CP01" the first time sounding the alarm, and even its credit rating was downgraded to Class C and China's first junk bond, but the March 7, 2007 full payment of the final still be resolved, the fact that breach did not cause the final addition, the market also appeared Meiyangufen, Shanghai Electric, Tianjin high-speed, Sino Group and a handful of short-term financing bills that twists and turns, but all a false alarm.

This gives a special impression that high-grade, low-income, security bonds, flooding the market, limiting the low-grade, high-yield, unsecured bonds, and bond departments in the approval time and requirements in various ways issuers to ensure payment of principal and interest due. As a result, bond market investors to the wrong signal, not even on the market there will be no breach of contract bonds rise, China's bond market is almost risk-free.

However, this paper argues that this is only the surface of health. Rapid expansion of China's bond market, but this is basically grow up in a vacuum, a large body is not necessarily robust. Specifically, the current bond market has been gradually showing many symptoms:
Market is incomplete state, and the lack of competition on the market are basically high-grade bonds, leading to the phenomenon of homogenization of the market, market structure defects in the product distribution is far beyond the normal sequence, not only out of touch with the needs of diverse even lead to a lack of market competition and a competitive market can not give the "right price signal", thus weakening the bond market resource allocation.

Links to free download http://www.hi138.com Difficult to achieve a low-grade corporate direct financing as bank loans and other indirect financing channels for SMEs "discrimination" as to the corporate bonds of high credit rating requirement, in fact, in direct financing channels for SMEs, once again blocked the road , which will once again stop the majority of SMEs in China's bond market, does not meet the state support of SME financing policy requirements.

Investment in small species, not satisfy the market demand would be limited to corporate bonds and bonds of high credit rating, in fact, the market provides only relative to a single product, even though such products may be safe, but the benefits are very low, for those who have higher risk tolerance, the pursuit of higher-yielding higher risk appetite for Investment institutions and personnel, the lack of variety can invest in bonds. unilaterally that the market can only be welcomed high-grade, low-risk income market is to ignore the subjective demand behavior.

Investors immature, weak awareness of the risk due to long supply market only safe level of debt, the market does not appear on the breach of contract, bond principal and interest of the bonds can not be returned, causing investors to blindly believe that China's corporate bond market is a safe Investment market, risk The lack of consideration of long-term, weakening investor risk awareness.

No significant role of rating agencies, industry, development is limited and since the main issue of bonds and bond credit rating on its bond offering price to play a leading role, the role of credit rating is obviously important, but because there is no event of default on the bond market, suggesting the rating level without any risk warning, so the companies will put pressure on rating agencies rating criteria may be relaxed, this would no doubt weaken the rating agencies rating the results of the pricing function, leading to the classification standards between the rating agencies will become increasingly assimilated and independence loss, is not conducive to the healthy development of the rating industry.

Bond underwriters sense of responsibility is not strong due to issue bonds to undergo a rigorous screening, and almost no defaults, resulting in bond underwriters have no incentive to treat strict underwriting and pressure of work, while monitoring the use of funds, information disclosure, and so a return visit after the release of are bound to lax management, its ability to deal with the risk of difficult to improve.

Legal system is imperfect, not tested. The same breach of contract because the market does not appear on the bonds, based on theoretical models developed out of the regulations and policies, only positive norms, and lack of reverse-test so that there can be no inspection regulations and policies of the improved, making the relevant management practices in the "low equilibrium" state of being, is not conducive to long-term health of China's bond market development.


Allowed to return to the market in the healthy development since the development of Chinese corporate bond market is not really robust, so in order to enhance its anti-virus capabilities, vaccine-type solution idea is "let go of God God, Caesar's return to Caesar." other words, in the bond market today such a scale, the Government should have a clear head, that is, "let the market go the market, the Government's owned by the government." once the market started its own law of development of its own , the market will self-adjust within a certain range, to achieve efficient allocation of resources. there is no need to worry about market risk how to do, not how to do payment, this is what the market itself.

Bond default risk is a key factor in investor decision-making influence, of course, an important part of the management of the bond market. Government's role should not be ignored, but the Government's management is not a human level and corporate bonds on the bond credit rating mandatory, but rather by the classification of debt management, credit rating, investor protections, bankruptcy liquidation market default risk management the basic system specifications.

The moment of emergency, the first level should be relaxed corporate bonds and debt levels of the main range, in particular, SMEs are encouraged to issue bonds, expand financing channels for SMEs, increasing the bond market, product supply, in particular, to accelerate the introduction of high-yield bonds, let the market become a competitive market, a full risk or market risk and return symmetrical. Only in this way, the Chinese corporate bond market will usher in a broader world.

Statistics show that in this year's economic recession and lead to poor corporate debt financing environment rising defaults, declining rates of return environment, the global speculative-grade bond default rate from the first quarter of 2009 increased 7.4% to 10.1% in the second quarter. Among them, the U.S. speculative grade bond default rate in June was 9.5%, 2.4% from a year earlier, rose to 12.8% the end of peak, but the return on high yield bonds in the second quarter, but hit a record high of 23 percent, while as of June 2009 the end of the European high-yield junk bond default rate level, or still only 5.6%, while the first half of the European high-yield bonds has brought 34.6% rate of return.

Defaults on junk bonds and bonds is no need to worry too much about the Chinese corporate bond market's healthy development called "default bonds" appear.

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