Article/Jia Kang of China Economic 50 People Forum
It has long been determined that the issuance of local bonds should disclose the balance sheet information of local governments, and then accept the credit rating of local governments as fair as possible from qualified institutions. What problem does this credit rating solve? According to the current framework, the rating results can only logically affect the bond interest rate level formed by China's local bonds, and do not involve the borrowing capacity and scale at all.
What should we do to reform the bond market? At present, the established goal of building a moderately prosperous society in an all-round way by 2020 has matched the comprehensive reform task of achieving "decisive results", as well as the comprehensive rule of law and strict governance of the ruling party. In the context of the above "four comprehensiveness", finance, as the "core of modern economy", must meet the requirements of modernization strategy. In the process of reform, development and diversification of China's financial industry, direct financing should especially become the focus of development, because the proportion of direct financing in China is still too low, less than 20%.
In addition to the stock market, the bond market is a very important part of direct financing, which should be viewed from both positive and negative aspects. First, as an integral part of China's overall financial reform and development, the healthy development of the bond market is indispensable, and its achievements should be recognized.
Briefly speaking, after the reform and opening up, China's bond market has made progress in borrowing foreign debt, in the institutional construction and action of national debt to adapt to the development of market economy, in the development of financial debt with certain characteristics, in the progress of the legal framework of the budget law for local debt after so many years of repeated exploration, and in the exploration of corporate debt that has existed for many years, There is something worthy of affirmation.
Recently, all aspects of exploration have further focused on asset securitization and treasury bond futures. After more than ten years of interruption, the latter has returned to operation under the logic of the market.
Secondly, while affirming these achievements and progress, we should also see that there are still some shortcomings in the bond market. How to further improve the development of the bond market is an unavoidable problem. Therefore, we must make some things clear as far as possible from the perspective of "problem orientation". To be problem oriented is to clarify what problems must be solved. In my opinion, at least the following five problems are unavoidable and must be solved.
First question: The variety of bond market is not diversified enough
In terms of the objective requirements of developing the socialist market economy, the types and term varieties of national debt, financial debt, local debt and enterprise debt are not rich enough. For example, local debt, after many difficulties, has finally been given a relevant framework by the budget law, and has been classified into general local debt and special local debt. However, from the international experience of market economy, based on such a rough line of division, there is actually quite a single variety of local debt.
Many years ago, when we studied the development of market economy, we noticed that international experience shows that there are many varieties to choose from at the level of local debt, which corresponds to the demand at different levels of the actual economy. One example that impressed me is that the United States, as the world's largest power, had local debt with a maturity of 100 years long ago in New York City, where its economy grew strongly.
How can the deadline be as long as 100 years. Who can expect to live 100 years? It is a kind of interest cutting bond, and the purchasers have income every year. The long-term support force formed by the government based on this bond for investment is beyond our imagination. Therefore, we must admit that the current shortage in the variety of China's bond market is a real problem.
The second problem: there is a large space for bond issuance, but it is underutilized
Taking local bonds as an example, after so many years of efforts, the overall issuance of local bonds of Yangguanghua this year only increased from 400 billion yuan the previous year to 600 billion yuan. Of course, the issue of local debt replacement is still being resolved. At present, there are two rounds of arrangements of 1 trillion yuan each. Compared with more than 10 trillion yuan of local bonds in previous years, the replacement is just a transition. The sunshine issuance after replacement should be faster and faster in a period of time, and the available space is still quite large. In this regard, we cannot be too hasty, but we should not be too conservative after a clear legal framework has been established.
I believe that after summing up experience, China's national debt and local debt should adapt to the objective requirements of the new normal, do more and make full use of their available space. This is especially true of corporate bonds. In the direct financing market, tens of thousands of enterprises need funds for innovative development, but the support mechanism in this regard is quite weak. Therefore, how to make full use of the scale of bond issuance is also an obvious challenge.
Third question: The bond issuance mechanism still has defects and constraints
For example, although local bonds have now been incorporated into the framework of the new budget law, they are still led by the central government. Every year, the overall issuance scale of the national local bonds is allocated to each provincial administrative region, which stipulates that the provincial administrative region has the right to issue on behalf of the municipal and county local governments as needed. Of course, we must first affirm that this is legislative progress, but at the same time we must admit that this is characterized by an obvious "initial stage".
We can ask logically: it has long been determined that the issuance of local bonds should disclose the balance sheet information of local governments, and then accept the credit rating of local governments from qualified institutions as fair as possible. What problem does this credit rating solve? According to the current framework, the rating results can only logically affect the bond interest rate level formed by China's local bonds, and do not involve the borrowing capacity and scale at all. However, from the observed cases, there should be a difference between "gilt edged bonds" and "silver edged bonds" between national bonds and local bonds, but the market cannot distinguish the difference, that is, the interest rate level formed is almost the same.
This means that China's bond issuance mechanism has yet to move closer to a mature market. In terms of risk constraints, national bonds and local bonds need to be differentiated into different risk levels by a sound issuance mechanism and market operation mechanism.
In terms of corporate bonds, we have to admit that the problem of "rigid cashing" has not been completely broken. After some enterprises issue bonds, once there are risks, they may become "politicized economic issues", which limits the issuance space of corporate bonds. In response to this constraint, we should take a long-term view and try to resolve it. However, to solve the problem of this mechanism, we clearly need corresponding supporting reforms. It is not only to discuss the issues of a certain department and an observation point that can work.
Fourth question: market segmentation
Formally, the segmentation of China's bond market is contrary to the objective requirement of taking the whole market as a unified market. The problem of market segmentation has been manifested in how to effectively connect the inter-bank market and the stock exchange market for many years. Recently, some scholars have further linked this issue with the interest rate marketization reform: if the bond market connectivity is obviously hindered, it is obviously not conducive to China's interest rate marketization reform, which is now a major issue to tackle.
If the market can be unified and the bond market segmentation can be substantially resolved through effective infrastructure support and market alliance, then the potential of the bond market can be fully released and the key reform of interest rate marketization, which has reached the "doorstep" stage, can be boosted.
Fifth question: the cultivation of bond professional institutions and talent teams still needs to be improved
In terms of long-term development, although great progress has been made in the training of institutions and talent teams in China's bond industry consulting and asset management, there is still a sense of preliminary and inexperienced. Looking back on the development of the bond market, the relevant institutions and personnel have made great contributions, but relative to the development needs, the pace needs to be accelerated and the professional level needs to be further improved.
For the above five problems, I think we can form solutions after investigation and identification. When we see the real problems clearly, the countermeasures are ready to come out. To solve the problem, it is particularly necessary to strengthen coordination and cooperation between all departments and all aspects. The consensus should be to take reform as the core, overcome difficulties, and "break through the barriers of interest solidification" driven by innovation; We should also respond to the current trend of "Internet+" with innovation, and at the same time, we should effectively prevent risks, which is where the overall situation and fundamental interests lie. The bond market and capital securitization also have a lot of uses for the emerging PPP - government and social capital cooperation.
In addition, the healthy development of the bond market also specifically requires the support of the rule of law. Under the overall framework of China's economic, political, administrative, judicial and social reforms, it can be seen clearly that the development of the bond market is objectively one of the catalysts for the rule of law.
In China's financial reform, the development of the bond market has lagged behind on the whole, but the general trend is that "once it is stored for a long time, it will be issued quickly". If we can make a breakthrough, it should show extraordinary development ability and enter the process of fully opening up the development space. We look forward to your joint efforts in the future to actively open this space.
(The author of this article introduces: Director of the Institute of Financial Science, Ministry of Finance, researcher, doctoral supervisor.)
