The underdevelopment of China's bond market needs to be urgently
addressed, deputies said at the ongoing "two sessions" on
Wednesday.
Chinese Premier Wen Jiabao stated on Monday in the government
report that China will speed up the development of the bond
market.
Currently, Chinese companies rely primarily on bank loans,
foreign investment and capital raised on the stock market for their
financing.
"The current situation is abnormal. A ?rapidly growing and
diversified economy like ours definitely needs more corporate
bonds," said Wu Jinglian, a famous economist and member of the
National Committee of the Chinese People's Political Consultative
Conference (CPPCC)."
The economist said that in mature market economies, corporate
bonds are a key method of corporate financing. In contrast to
shares, which may be acquired speculatively, corporate bonds
represent a stable, long-term source of financing.
Many Chinese companies have insufficient self-financing.
Statistics show that over the past decade self-financing, including
stocks and corporate bonds, stood at only 10 percent for Chinese
firms, as opposed to 70 percent in the United States.
In contrast to some of the world's leading economies, Chinese
companies have relied heavily on the stock market rather than the
bond market.
Experts said the bond market was encumbered by both red tape and
inefficient supervisory mechanisms.
According to Chinese law, domestic companies have to wait as
long as a year before being authorized to issue bonds.
"Without a prosperous bond market, China's capital markets will
remain immature," said Chen Yaoxian, chairman of China Securities
Depository and Clearing.
"The opaqueness of the bond market can make it attractive for
illegal funds," said Ni Runfeng, former president of Sichuan
Changhong Electron Group Corp.
"Take Wuxi Suntech Power Co. for example. Despite all the money
available in the domestic market for corporate financing, the
company had to seek out private overseas funds in order to be able
to list," Ni said. "If Wuxi Suntech had been able to issue
corporate bonds, that would have been a much more satisfactory
solution."
"We are working on a mechanism to make it easier for companies
to issue bonds," said Zhu Congjiu, general manager of the Shanghai
Stock Exchange.
According to the third national financial work conference
concluded in January, the China Securities Regulatory Commission
will supervise corporate bond issues and the National Development
and Reform Commission will examine SOE bonds related to fixed
assets investment.
But it is not yet clear who will have the final responsibility
for developing the bond market.
"I think we should set up a consolidated supervision mechanism
and I think securities regulatory organs should play a leading role
in it," said Zhu.
Earlier reports said that Chinese corporate bond issues will
approach 160 billion yuan in 2007 -- up a whopping 55 percent on
the 2006 figure of 101.5 billion yuan.
(Xinhua News Agency March 7, 2007)