In China, for a long time, the part of the securities market of stocks, bonds and funds market is a popular concerned issue, Which also is part of stock market of corporate bonds is theoretically less people make inquiries short for Tianjin, hesitate on the practice. Many problems in China’s corporate bond market, must take appropriate measures to change the present status of the bonds, to facilitate the long-term sustainable development of China’s securities market.
First, the concept of corporate bonds
1. the concept of corporate bonds
Corporate bond is an enterprise to raise funds, issued in accordance with legal procedures, and agreement within a certain period of repayment of the bonds. Corporate bonds represent a debt between issuers and investors relations, bond holders are creditors of the company, are not the owner, no right to participate in or interfere in business management. Corporate bonds and equities and portfolio can be freely transferable.
In foreign countries, because of its subject only bond company limited, corporate bonds and securities of the company two names can be used in the same sense, sometimes mixing the two, but according to internationally accepted name should be referred to as company stock. In China, the concept, a wide range of corporate bonds. According to the structured corporate bond management provides, issuers refers has the nature of the legal personality of the various types of enterprises, including joint-stock company, this should be, in the company’s securities, also known as corporate bonds.
2. the basic elements of corporate bonds
Corporate bond is a means of financing and investment tools. As reflected debt voucher, composed chiefly of the following aspects of its basic elements +
Is the bond principal. In China, the issuance of corporate bonds subject refers to the unincorporated enterprises in the country. According to statutory procedures for the issuance of bonds of enterprises, and achieved certain funds in the period of tenure and the resulting benefits, and which bear the debt risks and obligations, shall be scheduled debt servicing. Subject to approved enterprises, no unit or individual may issue corporate bonds.
Second, investors, the bond holders. His press
Provides the right to due interest and recover the principal, but does not participate in the management of enterprises, management is not responsible for the enterprise.
Third, interest rate. Corporate bond interest rates high and low quantity directly related to the financing for issuers of bonds, financing costs and investor interests. Corporate bond interest rate acceptance rate by investors, issuers of affordability and social reputation trends, changes in market interest rates and the impact of such factors as the length of the period of the bonds.
Four is the deadline. From the bond issue date to the period until the date repayment of principal and interest for the duration of the bond. Businesses often according to duration of funding needs, the future level of market interest rates, market developed, bonds, other bonds on the market situation, the preference of investors to determine the period of the term structure of bond.
Second, the analysis of problems in China’s corporate bond market
Judging from the development course of Chinese Enterprise bond more than 10 years, corporate bond market in national economic construction in China raised significant funds, for the development of capital markets, promoting State enterprise reform, financial reform and financing system reform made a positive contribution. But and world capital markets of development status compared (issued bond is Western enterprise of main financing channels, and unit marked financing accounted for smaller part), and China of stock, and bonds market compared, China of enterprise bond market relative lag, regardless of in issued scale also is in II level market of mature degree Shang are exists is large gap, Enterprise bond in entire securities market in the of status and role also no get full of play. Compared with other financial products, development of enterprise bond market is really struggling. Why not to answer this question must be on China’s Enterprise bond supply and demand and economic analysis of market conditions.
(A) the demand for corporate bonds of constraints
1. the strategy of misleading of the stock market, corporate bond market late into the stock market overall development planning
The deep root system of Chinese Enterprise bond market in less developed, is a pattern of misleading Government securities market-driven development. Drive models led to China’s securities market development goals of the Government of binary ‘ it is necessary to assume the task of optimal allocation of funds, but also take on Enterprise stock system reform, Mission of promoting economic reforms, only meet the requirements of either the market form can get government support and encouragement. When a conflict occurs when the binary target difficult co-existence, is often at the expense of funds allocation efficiency in practical operation, to ensure the smooth progress of economic reform. This strategy makes the development of enterprise bond market into the Government securities market practice in the most neglected part. China’s Enterprise bond market development is another important constraint due to the enterprise itself has many flaws, mainly in the unreasonable, such as enterprise property right system of enterprise capital structure is reasonable, the enterprise’s own lack of credibility.
2. lack of corporate bond pricing of RMB interest rate
Benchmark interest rate refers to the money accepted universal reference interest rate on the market, is the basis of formation of market prices of other financial products. That is, to achieve the liberalization of interest rate marketization and, on the financial markets must have a benchmark interest rate by market participants generally recognized, prices of other financial products developed under the level of interest rates. Judging from the general law of the international financial markets, are eligible to become that interest rates can only be those of structured financial products, high credit, good for circulation rate, and most have the characteristic of interest rates in the market is the yields on government bonds. Because bonds issue is the main body of the State, its high reputation, lowest risk of investment bonds. Bonds circulation, good for circulation, realized capacity. Time fixed debt, variety maturity structure reasonable, market participants can be from any time period of 3 months to more than 10-year government bond yields. Because bond yields have these characteristics, financial market participants generally use this rate as a benchmark for market interest rates. In the past for a long time, because of China’s bond market developed, throughout the financial markets, there is no one on base rate. It objectively would bring to corporate bond pricing difficult, in this case to determine corporate bond interest rate is difficult to appeal to investors.
3. lack of scientific system of corporate bond pricing
Due to the lack of a recognized benchmark in the market interest rate, therefore, at the time of corporate bond pricing, can only be taken to determine the administrative method. As prescribed by the relevant Government Department, corporate bond coupon can not be higher than bank deposits of $ 40% over the same period. practice shows that this pricing method is extremely unreasonable, because, this pricing method does not take into account credit value. Under this provision, regardless of corporate reputation, ability to repay the strength, size, and investors assume the risk of, as long as the period for issuing bonds of the same, bond prices, which objectively gave corporate bond price signals causing confusion. But, in fact, many corporate bonds issued in China interest rate bond yields lower than the same period, which limits the enthusiasm of investors to buy corporate bonds.
(B) demand for corporate bonds investment constraints
1. secondary market developmental immaturity, poor corporate bond liquidity
Primary market despite the slow development of enterprise bond market in China, but after all, in advance. At present China’s corporate bond secondary market virtually stagnant, less in the listed species, the small, little volume. Slow secondary corporate bond market development is the direct result of poor on realization of corporate bonds, investors when they need money, bonds sell them in the hands of, corporate bond equal to Bank term deposits, were not even time deposits (term deposits can withdraw, and corporate bonds cannot), cannot reflect the superiority of the bonds, investor confidence. Secondary market of corporate bonds-lag effect will, in turn, primary market issuance, thereby constraining the overall development of the corporate bond market.
2. Enterprise bond of varieties, and period single, lack financial innovation since 1988 China issued Enterprise bond yilai, Enterprise bond of issued varieties basically a mode ‘ focus construction bond or central enterprise bond or local enterprise bond, and period 2-3 years, and due once debt coupon, and unified interest rate,, years consistency, lack flexible and financial innovation, on investors attractive little, even has investors, its face of enterprise credit risk and interest rate risk is large, Enterprise bond market only is moribund, desolate.
3. lack of authority of the rating agencies, corporate bond credit rating not standardized
In China, the issuance of corporate bonds of enterprises on the issue of disclosure was minimal, investors ‘ risk in corporate bonds, liquidity, security and lack of full understanding of revenue. In this way, intermediary institutions, in particular credit rating agencies, scientific and objective credit rating, as the bond market investors and financiers on a bridge of communication. Although there have been many intermediary organizations in China at present, such as property evaluation firms, accounting firms, the credit rating agencies, corporate bonds of each issue also has a credit rating, but because of the lack of objective criteria, and even many intermediaries to the seal of the money, lack of professional ethics. The result that many intermediaries as AA level Enterprise bond, due not phenomenon still occurs. Investors will have to do to objectivity, neutrality and impartiality of the Agency expressed doubts, so that intermediaries have lost the trust of investors.
Third, the development of enterprise bond market in China
Situation and development of China’s Enterprise bond market very unsuited, this issue has been more and more the attention of the Government and the market concerned, as well as more and more recognized by the theoretical and practical workers. With the smooth progress of China’s economic system, must obtain considerable development of enterprise bond market in China. However, the development of enterprise bond market will be a long-term process, in this process, the need to vigorously create conditions, strengthen the operations of the corporate bond management, efforts to foster and promote the overall development of enterprise bond market in China.
1. changing of securities market development strategy to expand corporate bond issuance amount, improve the efficiency of the allocation of funds
(1) rationalize relations between equities, government bonds and corporate bonds, clear subject status of corporate bonds. As for static, stocks, bonds and three corporate bonds market absorbed amount of funds for this shift substitution. However, from the perspective of the dynamics and structure, presents three complementary relationship of mutual promotion. China’s bond issuance in the near future, in particular listed company financing bonds and convertible bond issuance of non-listed companies, helps to relieve pressure on capacity expansion of the stock market. Therefore, on the securities market development the guiding ideology, should not be oversimplified to equities, government bonds against corporate bonds with.
(2) expansion of corporate bond issuance limit, meet some excellent business development needs of large enterprises. Currently China has with the huge demand for corporate bonds, but because of the strong series supporting conditions of corporate bonds issued is also needed in the gradual improvement in the development, gradually scaling approach can be taken in China, finally cancel the bond line of control. On the structure of the corporate bond issuance limit control, our country should continue to maintain the bond requirements of some key State-owned enterprises, on the other part can cause lines to give some excellent operating performance, but cash-strapped private enterprises.
2. clear Enterprise property rights, strict bond principal, improving enterprise reputation
To build a true sense of the corporate bond market, most fundamentally to the enterprise property rights reform. In essence, aims to create a real reform of property right or the owner of the rational market players. Enterprise once into real management, self-financing, self development, self-constraint acts of legal entities or legal status of independent, autonomous, market players of your own responsibility, will naturally become the mainstay of enterprise bond market will have real financing autonomy, issuance of corporate bonds is necessarily self selection result. Established ownership of enterprises, with independent property, in accordance with market supply and demand, based on their profitability and debt-servicing capacity, size of the progressive development of enterprise bond, and become truly qualified issuing body, accept reasonable constraint and supervision of markets and investors, in the real market functioning in an environment of risk and return, and to ensure that bond matured. At the same time, to establish a corporate bond market access mechanisms and do not have the issue conditions of the enterprise, resolutely cannot enter the corporate bond market. Such clear Enterprise property rights, strict bond principal, you can filter out a large number of unqualified enterprises into the bond market, which improve corporate reputation, rebuilding the image of corporate bonds, establishing the confidence of investors and regulate the behavior of the borrowing enterprises will play a very good role.
3. supporting reform of the corporate bond issuance market
(1) establish a benchmark interest rate of RMB bond market, issuing interest rate liberalization. Interest rates is one of the core issues of corporate bonds circulation, to a certain extent on the bond market supply and demand play a decisive role. Therefore, the development of enterprise bond market calling for the establishment of China’s benchmark interest rate of the Renminbi, straightening out the prices in the capital, realization of marketization of interest rates. Development experience of the market economy, in a variety of financial products, able to shoulder the heavy responsibility benchmark interest rate of the renminbi is only Treasury products. Therefore, we must vigorously develop the bond market, as soon as possible to achieve debt interest rate market-oriented, rich national debt term structure, enhance rates of basic reference, formulation of corporate bond issuance rates are no longer a bank savings deposit interest rates, but yields on Treasury bonds to the same period as a benchmark interest rate, on the basis of implementation including the marketization of interest rates, bond yields.
(2) establish scientific corporate bond pricing system. High risk, high return is an important rule of market economy. According to this principle, investments of investors in order to get high, will take higher risks. Enterprises are to integrate the cost of capital is lower, you have to have higher credibility. Because the different reputation levels of costs incurred by enterprises into capital is not the same. If the AA level enterprise cost of financing Government bond yield for the same period (base rate) plus 30 pips on, CCC class enterprise spending this should be added to 200~300 a basic point. Is due to the different levels of credit financing of costs are different, the objectively forced change the operational mechanisms of enterprises improve their reputation and credit levels, and establish a good image in the investors group.
(3) innovation of issuing, issuing scale, reduce distribution costs. Due to the poor circulation of Chinese Enterprise bond, enterprise’s credit level is low or the broker’s own sales channel reasons such as poor, poor sales of Chinese Enterprise bond over the years (slightly changed in these two years). To resolve this issue, will require issuing mode’s innovation. A is for interest rate tender approach, enabling enterprises to choose the most efficient brokerages issued issued lower-cost, directly reduce the cost of financing for enterprises; second, issuing scale, management should be appropriate to increase the Central bond lines, encouraging increased circulation for a single issuing body, issued corporate bonds online, expanding the proportion of paperless bond.
(4) actively promote corporate bond variety. Varieties of a single investor choice small, this is China’s bond market, especially in slow trading market one of the major indigestion. Therefore, you should research and development, timely introduction of new varieties, such as listed companies listed or preparing to issue convertible bond; export-oriented companies may be appropriate to issue foreign currency bonds; in addition, you can also launch discount bonds, floating rate bonds, redeemable bonds and revenue bonds to meet market needs.
4. actively foster circulation market of corporate bonds, increasing liquidity in corporate bonds
China’s corporate bond has long been in “release only, no transactions, status, especially local corporate bonds. Due to sluggish corporate bond transactions, poor circulation, increase the risk of investors on its expected due honour requests for additional, more difficult to scroll issuing of bonds. Therefore, the development of enterprise bond market in a matter of urgency, is to solve the flow of corporate bond issues.
(1) development of enterprise bond secondary market. Secondary market is the lifeline of the bond market, if a market is only a secondary market without market, this market cannot grow, therefore, to establish an active and efficient corporate bond secondary market, create a good environment for the primary market. Combined with market-oriented reform of interest rate, increase the market for corporate bonds, gradually opening up the transfer of corporate bonds circulation prices, making notes on the holding during the rational flow and direct realisation, thus promoting the healthy development of the bond market.
(2) establishment of over-the-counter corporate bond market. From the experience of developed market economy, corporate bonds in the secondary market by trading markets and parallel composition transaction counter transaction of securities companies on the market, most over-the-counter market-oriented. Against our current OTC markets are relatively weak, should focus on the development of over-the-counter markets.
(3) establishment of consolidated bonds registration, custody and clearing Center. Experience from countries, increasingly dependent on the financial markets with advanced computer technology and modern means of communication for technical support of payment systems and securities settlement systems. To the development of securities market in China, it should establish a unified national bonds custody and settlement Center, only then could make China’s bond market higher level.
5. cultivation Enterprise bond of institutions investors team institutions investors has expertise, can on investment tools of bad made own of judgment, easily appears follow behavior, this for market of smooth development is essential of; institutions investors can own of risk hobby for assets combination, resist market risk of ability strong; institutions investors has a internal and external restricting mechanism, investment behavior comparison specification; institutions investors of development and grow conducive to II level market of prosperity. Therefore, to makes China Securities market towards specification and mature, on must vigorously development institutions investors team, exact to said, is to vigorously development variety of investment fund, (currently China Investment Fund himself began started) as securities investment fund, and bonds Fund, and stock fund, and Enterprise Bond Fund, and mixed type Fund, and insurance fund,, to meet each class, and various risk hobby of investors of need. Also, institutional investors after the teams develop, due to operate in the market is dominated by professionals, therefore, securities market development will be more stable and specifications.
6. the establishment of legal system of corporate bonds, strengthening government authority to establish and perfect the various legal systems associated with corporate bonds, strengthening supervision is important measure to promote the healthy development of China’s corporate bond market. Management should be on the basis of the relevant securities regulations, further improving the corporate bonds of laws and regulations, so as to standardize the corporate bond market and the functioning of the market. At the same time, by the Department in charge of bonds to build a strong regulatory system of China’s Enterprise bond market is a matter of urgency.
(1) improving the system of enterprise bond credit rating, establish credit intermediaries. Credit rating of corporate bonds marked the bond itself, the trust and the solvency of enterprises. Public disclosure of corporate bond credit rating will help investors identify and judge. Debt ratings by the rating company specialized intermediary. To establish an evaluation body by General investor confidence, we must establish a strict set of intermediaries supervision and management regulations, credit ratings agencies accountable for their assessment results. Meanwhile, the Government departments concerned should refer to international traffic on national standard of credit rating systems to develop a credit rating of bond market, thus preventing poor credit rating of corporate bonds market, providing our investors with a reference for selecting investment products.
(2) improve corporate bond guarantee system. Strengthen the bond guarantee, capital mortgage, irrevocable or bear joint and several liability and other forms of guarantee, guarantee not to implement or false guarantees will not be approved to issue bonds, this is an important system to prevent corporate bond defaults. Guarantees is the key to a sound system on enterprise’s default handling mortgage operations issues. Consortium mortgage how lessons from Western countries. This form is characterized by enterprise-specific properties (such as easy to sell products, raw materials and even machines) for mortgage, conducive to the operation.
(3) establish mechanism for protection of the interests of bondholders. Investing in bonds is an investment. Investment income is also a risk, fight for benefits to avoid risks, is the common aspiration of the investors. Therefore, it is necessary to establish in the corporate bond market on the mechanism of legal protection of the interests of bondholders, realization of the protection of investors claims to enable investors to maintain confidence in the corporate bond market. Seen from the actual situation of China’s Enterprise bond market, establish a mechanism of legal protection to the interests of bondholders, need to do the following two aspects of work: one is to strengthen the bonds binding terms. This requires that the bond coupon payment provisions not only in terms of the bond principal and interest, and on the bond or in the relevant legal documents, should have two main contractual terms, that is, equal priority in repayment terms and limitation of mortgage terms. Second, to establish a corporate trustee system. In Western countries, a system is to address the large number of special coupons set up human rights problems difficult to set, namely by the bond Corporation signed an agreement and trust company, payment not due if the former, the Bondholders are delegating powers to a trust company, the unified exercise to enable investors to gain the mortgage principal. In corporate bonds in the future in China to gradually introduce and improve the system.
(4) establish a debt service Fund of the enterprise. Issuers to ensure that the due debt-servicing has sufficient funds, establish a debt service fund system, you can extract a percentage revenue from each sale, or regularly set aside a certain amount from a bank deposit, rolled over to the sinking fund account to, over time, due debt funding is guaranteed.
(5) strengthening information disclosure of corporate bond market, improving public oversight mechanisms. Corporate bond payment difficulties, poor corporate bond credit because, for one, is as stipulated in the Constitution of the bond at a reasonable use of funds. Seen from the outside, that information did not make a disclosure. Therefore, to standardize the information disclosure of corporate bond market, improving public oversight mechanisms.