Challenges from WTO Membership
Edited by Kam C. Chan, Hung-Gay Fung and Qingfeng ‘Wilson’ Liu
Chapter 2: Bond Markets: Introduction and Analysis
Hung-gay Fung, Ying Han and Qingfeng ‘Wilson’ Liu INTRODUCTION The Chinese bond market diﬀers substantially from other bond markets across the world, particularly the US market. The Chinese bond market is fragmented and complicated because of diﬀerent regulations governing the operations of the bond issues. The Chinese bond market is made up of Government or Treasury bonds (T-bonds), ﬁnancial institutional bonds (F-bonds), enterprise bonds (E-bonds), and other bond issues such as foreign bonds (Zhang and Ji 2001). China’s T-bond market has been the important ﬁnancial asset in its overall ﬁnancial market (including stock market and futures market) in general in terms of size and the general bond market in particular. The Chinese bonds are traded in three diﬀerent markets. That is, they are traded on the exchanges (Shanghai Stock Exchange and Shenzhen Stock Exchange), in the interbank market, and in the bank-counter market. The interbank market has the largest trading volume among the three markets, and it is the most actively traded market. Table 2.1 shows some interesting characteristics of China’s bonds. Panel A of Table 2.1 lists the amount issued for the most important types of Chinese bonds in 2004 and 2005. In 2004, more than half of the bonds issued were central bank bonds (54.6 percent), followed by the T-bonds (25.1 percent), F-bonds (18.4 percent), and E-bonds (1.9 percent). In 2005, the government bond (T-bond) accounted for 16 percent of the total bond market, while the Central Bank bond accounted for about 62.3 percent of...
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