China-UK Corporate Bond Seminar, jointly organised by Financial Research Institute, People's Bank of China, British Embassy Beijing and NAFMII was held on 20 April in Beijing. The Seminar focused on issues surrounding risk management, issuer responsibility and investor protection of corporate bonds. Vice Governor Yi Gang of the People's Bank of China, and the British Ambassador, Sir William Ehrman, jointly opened the Seminar.
Yi Gang pointed out that China's corporate bond market has great potential. Yi Gang said the development of China's financial system had been imbalanced for a long period, as the proportion of direct financing was too low. Though the corporate bond market has developed quickly in recent years, it remains on a small scale, and lags behind other aspects of financial market development.
Lack of access to direct financing channels increases risks in the economy and affects financial stability. Yi Gang pointed out that one of most important reasons that caused the relatively stagnant development of China's corporate bond market was lack of adequate risk management capabilities. This critical issue was the focus of today's discussions.
Yi Gang said China's bond market has great potential. To promote the development of the corporate bond market, relevant organisation should focus on improving the capacity of risk disposal and management, he said. He highlighted six priorities. Firstly, improving transparency and information disclosure of the main issuers.
Secondly, promoting the development of bond rating agencies and increasing research on the roles of bond rating agencies in the market. Thirdly, increasing the capacity of institutional investors to manage the risks involved in buying corporate bonds. Fourthly to strengthen market infrastructure, perfecting the procedures of bond issuance, underwriting, and trading.
Fifthly, to strengthen market regulation. The regulators should learn from the market. On the one hand, over-supervision will constrain market development, on the other hand, over-reliance on the corporate governance structure and shareholders self-regulation will lead to the lack of effective regulation.
Sixthly, to promote closer linkages between China's segmented corporate bond markets. The issuers should be able to freely choose which market to issue, trade or liquidate bonds in. The bond market should also be linked with other derivatives market, such as futures and swaps market.
The Ambassador, Sir William Ehrman stressed that the seminar was part of the China-UK Financial Services Collaboration programme, that fits within the framework of the China-UK Economic and Financial Dialogue. Co-operation and dialogue between China and UK on financial issues was a helpful way to increase investors and consumers' confidence in our two countries.
Strengthening co-operation between China and the UK was also a useful way to help the two countries deal with the financial crisis. He stressed that developing a sound corporate bond market would help China deal with the impacts of the international financial crisis. It was also important to further open up and develop China's financial market, this would play an essential role in promoting China's sustainable economic growth.
Speakers at the seminar included representatives from the People's Bank of China, China's Banking Regulatory Commission, China's Insurance Regulatory Commission, China Securities Depository and Central Clearing, Renmin University, as well as the international companies TradeWeb, HSBC, Standard Chartered, and Clifford Chance and the International Capital Markets Association.
