Annual Review of China s Bond Market (2013)

Transcription

1 Annual Review of China s Bond Market (2013) By ChinaBond Pricing Center, China Central Depository Trust & Clearing Co., Ltd 1

2 Content Forward... 4 Part One. A Review of the global economy in I.Global macroeconomics as a whole recovered slowly (i)european economy faltered, while debt risk remained placid (ii)american economy grew quarter by quarter, with financial balance becoming an important, influential factor (iii)global business activities got widely warm again... 6 II.Domestic economy grew steadily and slowly Part Two. Changes of price and YTM of 2013 Inter-bank bond market... 9 I. Overall ChinaBond index declined significantly... 9 II.Interest of Currency Market Fluctuated Significantly Part Three.The bond market scale I.The annual total issuance amount in bond market grew at a slower pace II.Total depository amount in bond market maintained sound growth III.Transaction activity in bond market Part Four Bond Market Operational features I. The Regulation and Standardization of Bond Market Has Been Strengthened II. The Significant Innovative Achievements in Bond Market III. The development of Public Bond Issuance has been slowed down, while Private Bond Issuance has been accelerated IV. Money market funds and bank s wealth-management products developed rapidly, while bond funds shrank V. The cost of bond issuance increased VI. Bond index fund got further developed VII.The degree of bond market opening to outside was further strengthened Part Five. Suggestions on the Development of the Bond Market in I.Further Improve Market Mechanisms and Perfect the Treasure Bonds Yield Rate Curve (i). Improve the stratification mechanism of the inter-bank bond market (ii). Strive to develop publicly raised bond funds (iii). Further improve market maker mechanisms (iv). Increase the frequency of the rolling release and of the renewal of long-term, key-deadline treasure bonds (v). Make the tax system of the bond market fairer (vi). Encourage the market s innovations in utilizing the Treasure Bonds Yield Rate Curve II.Maintain Appropriate Liquidity III.Enhancing the Transparency of Privately Raised Bonds IV. Enhance the Centralization of Bond Depositing V. Reform in the Pricing Mechanism of Deposits

3 Contact Information: Sun Mingjie, Jiao Yulong, Mo Jiaqi, Wu Junxiao, Shi Tong, Shi Xinyue, Ye Yangchuan, 3

4 Forward 2013 is an extraordinary year in the history of China s bond market. As far as the international environment is concerned, with the marked recovering situation of American and European economy day by day, the domestic bond market has been jumpy all the time about the Federal Reserve System s withdrawal from QE; As far as the domestic economy environment is concerned, China s economic condition kept recovering under the broad political background of interest rate liberalization. All kinds of financial innovations have been continually emerging, and the market has hardly seen such a great effort of monitoring in recent years. Liquidity seemed to be precious, and the interest rate in money market had wide-range fluctuations twice during the year. The yield curve of bond market as a whole has gone up to another stage. The price of bond market dropped quickly after a small growth during the first half of the year, China bond Index (net price) reached point at the end of the year, dropping by 4.65 percent compared to the end of last year, hitting the biggest annual drop recorded since

5 Part One. A Review of the global economy in 2013 I.Global economy as a whole recovered slowly. In 2003, global economy revealed important features of slow recovery as a whole while separated developmental trend for individuals. With inconsistent process of economic recovery, the macroeconomic policy of each economy appeared to be different as well. There were constant controversies about financial balance in America. European countries slowed down the pace of fiscal restraint, while Japan was still implementing fiscal incentive with every possible effort. The Federal Reserve System has begun to withdraw from the QE while European countries and Japan insisted on loose monetary policy. Due to deficit, increasing debt risk and inflationary pressure, emerging economies monetary and fiscal policy tended to be cautious. (i)european economy faltered, while debt risk remained placid. In 2013, after the economic shrink for several continuous quarters, European economy finally realized positive increase in the second and third quarter, with European Union s growth rate at -0.1%, 0.4% and 0.2% at a month-on-month basis for the first three quarters and Euro zone s growth rate at -0.2%, 0.3% and 0.1% at a month-on-month basis for the first three quarters. In a word, European economy has got rid of 5

6 recession and the European debt crisis has been somewhat relieved. (ii)american economy grew quarter by quarter, with financial balance becoming an important and influential factor. In 2013, American economy developed well as a whole, with the acceleration rate increasing quarter by quarter and a relative steady basis of recovery. The annualized real GDP at a month-on-month basis for the first three quarters in America were 1.1%, 2.5% and 4.1%. Unemployment rate dropped, with the labor market being somewhat improved. The unemployment rate in America dropped from 7.9 percent at the beginning of 2013 to 7 percent in November, which has been the lowest since the November in In a word, American economy recovered strongly in 2013, with the threatening but not risky implementations of macroeconomic policies, which has laid a solid foundation for further development in (iii)global business activities got widely warm again On December, the BDI ended up in 2277 points, up by 1578 points, or percent from the end of 2012 when the Index was 699 points. As a whole, global business activities got widely warm again. 6

7 Figure 1: Historical trend of China bond inter-bank fixed interest rate 10-year Treasury bond yield and BDI Note: BDI (white); China bond inter-bank fixed interest rate 10-year Treasury bond yield (yellow) Source: Bloomberg II.Domestic economy grew steadily and slowly. Carrying on the steady and slow growth since the end of 2012, Chinese economy continued to implement positive fiscal policy and sound monetary policy in While withdrawing step-by-step from wide-range fiscal incentive policies, China kept the appropriate scale of monetary credit loan and fixed-asset investment with great effort and has broadly reversed the trend that real GDP growth rate kept falling quarter by quarter since However, the temporary stagnation in Chinese economic recovery in 2013 didn t stop the expansion process of China s broadly prosperous economy since 2010 but formed a new economic trough in According to the gross domestic product, the growth rate 7

8 of GDP were 7.7%, 7.6%, 7.7% respectively for the first three quarters, continuing the slow growth pace in 2012, which means that Chinese economy has been slowing down its pace for 8 continuous quarters. According to the date published yesterday by National Bureau of Statistics of China, On December, 2013, China s PMI was 51%, dropping by 0.4 percent over last month, up by 0.2 percent over the average point of the whole year and has been higher than the tipping point for 15 continuous months. It was the first drop for this index since June, Figure 2: GDP growth at a year-on-year basis (%) Source: National Bureau of Statistics of China Figure 3: CPI Trend since

9 Source: National Bureau of Statistics of China Figure 4: PMI trend (adjusted by season) Source: National Bureau of Statistics of China Part Two. Changes of price and YTM of 2013 Inter-bank bond market I. Overall ChinaBond index declined significantly Overall ChinaBond index declined significantly in In detail, it increased steady in the first 6 months, then decreased significantly in the second 6 months, the YTM curve rose after declining. Till the end of December 2013, ChinaBond General index (net price) was 96.07,it reduced 4.65% from points at the end of December ChinaBond General index (total Return) was points,it diminished 0.5% from in the end of December In general, 2013 Inter-bank bond market price trend had two stages: the first stage was 9

10 from January to May, the ChinaBond index was climbing slowly, the second stage, June-December, the index declined with fluctuating. The change of YTM curves in each interval shows as following: Figure 5: Trend for ChinaBond Index (Net Price) in 2013 Source: The first stage:january-may, ChinaBond YTM declines slowly. At the beginning of the year,under huge amount foreign currency, liquidity tended to be moderate, the YTM curve declined with fluctuating from January to April. YTM of 10-year Treasury bond decreased 13BP to 3.44% Figure 6: ChinaBond yield curve (from January to May) Source: The second stage, June-December,ChinaBond Yield Curve soared. 10

11 Under the effect of reserve pre-payment, global liquidity shrink, fiscal payment delay and end of season reason etc., liquidity under the pressure and short-term YTM exhibited noticeable increase; however, the long-term YTM was stable thanks to the benefit of macro-economy, during the June. From July to October, ChinaBond YTM increased smoothly. In general, ChinaBond YTM increased significantly, but the Net Price Index plunged and secondary market investment reduced significantly. From November to December, liquidity was still under pressure, the fundamental was not benefit the debt market due to the poor liquidity in the end of the year. ChinaBond YTM increased slowly; the 10-year treasury bond YTM increased 111BP to 4.55%. Figure7: ChinaBond yield curve (from June to December) Source: II.Interest of Money Market Fluctuated Significantly. In 2013,there was two significant interest fluctuations in money market. The first one was at early of June, that was affect by many 11

12 reasons such as the US prepared to end its QE that brought change in the foreign exchange market, as well as festival investments, accrued reserve payment, tax payment clearance etc. It was due to the poor control in market liquidity and debt, it also caused by poor confidence to China economy from oversea market. In addition, a bundle of policies launched from government that pushed SHIBOR overnight and SHIBOR& to13.44% and 11% respectively. From the end of June, PBoC took a series measurement to stabilize the market interest rate, to reduce time and sentimental effects and stabilized currency market. The second fluctuation appeared in the middle of December, similarly as the first one, SHIBOR overnight and SHIBOR7 reached 4.51% and 8.84 respectively. Figure 8: SHIBOR trend since 2013 (%) Source: 12

13 Part Three.The bond market scale I.The annual total issuance amount in bond market grew at a slower pace. Table 1:Bond issuance in the market(2013) Amount Issued/bln yuan 13 Number of Bonds Whole market 87, Bonds deposited in CCDC 56, Bonds deposited in Shanghai clearing house 27, Bonds deposited in SD&C 2, Source: Wind In 2013, the bond market has issued all kinds of bonds (including central bank note) hundred million Yuan, increasing by hundred million Yuan over last year, with a growth of 9.05 percent year-to-year, and representing a deceleration of 2.61 percent compared to Meanwhile, 1150 bonds were newly issued through CCDC, with the gross issuance amount of hundred million Yuan, accounting for percent of the bond market; 2000 bonds were newly issued through Shanghai Clearing House, with the gross issuance amount of hundred million Yuan, accounting for 32 percent of the bond market; corporate bonds, together with small and medium corporation private placement bonds, with the total issuance number of 331, were issued through China Securities Index for hundred million Yuan, accounting for 3.12 percent of the

14 bond market. From the type structure of newly-issued bonds through CCDC, in 2013, Treasury bonds were issued for hundred million Yuan, going up by 11.15% over last year; corporate bonds were issued for hundred million Yuan, dropping by percent over last year; policy bank bonds were issued for hundred million Yuan, decreasing by 6.73 percent; commercial bank notes were issued for hundred million Yuan, dropping by percent year-on-year. Policy bank bonds and Treasury bonds took up the main space among the issuance scale, accounting altogether for about percent of the gross issuance amount. Figure 9: Proportion of total issuance amount of all types of bonds issued through CCDC, 2013 Source: 14

15 From the term structure of newly-issued bonds through CCDC, 3-10 year medium-term and long-term bond issuance amount accounted for 56.30%, 0-3 year short-term and over 10 year long-term bond issuance amount accounted for 39.40% and 4.30% respectively. Figure 10: Proportion of total issuance amount of bonds with all terms through CCDC, 2013 II.Total depository amount in bond market maintained sound growth. Table 2: Depository balance of the bond market in 2013(by bond type) Balance (Unit: hundred million Yuan) 15 Number of deposited bonds Whole market 294, Bonds deposited in CCDC 259, Bonds deposited in Shanghai clearing house 26, Bonds deposited in SD&C 8, Source: Wind

16 Until the end-december in 2013, the total depository amount in national bond market reached trillion Yuan, up by 3.48 trillion Yuan, or percent, from the same period of previous year. In particular, the depository amount under CCDC reached trillion Yuan, accounting for percent of the market; the depository amount under Shanghai Clearing House reached 2.69 trillion Yuan, accounting for 9.11 percent of the market; and corporate bonds, as well as small and medium corporation private placement bonds deposited under China Securities Index totaled 0.88 trillion Yuan, accounting for 3 percent of the market. III.Transaction activity in bond market. Table 3:2013 Bond Market Transaction record(classified according to different markets) Amount (Unit: hundred million Yuan) 16 Numbers of transactions Gross markets 2,708, ,071,957 CCDC trades 1,959, ,451 Spot trades 369, ,536 Repo trades 1,589, ,915 Shanghai-Clearing trades 108, ,506 Spot trades 52, ,098 Repo trades 55, ,408 Stock Exchange trades 640, Spot trades 10, Repo trades 630, Source: Wind In 2013, the spot trade and repurchase in bond market amounted trillion Yuan, increasing by 1.15 percent over last year, with the acceleration rate dropping by percent compared to The

17 spot trading settlement amount reached trillion Yuan, decreasing by 45.40% over last year; and the repurchase trading amount reached trillion Yuan, increasing by percent over last year. Settlement amount recorded in CCDC totaled trillion Yuan, decreasing by percent over last year. In particular, the settlement amount of spot trading reached trillion Yuan, decreasing by percent; while that of repurchase reached trillion Yuan, going up by 7.68 percent over last year. Settlement amount recorded in Shanghai Clearing House totaled trillion Yuan, dropping by 8.64 percent year-on-year. Meanwhile, the settlement amount of spot trading reached 5.24 trillion Yuan, dropping by percent; while that of repurchase reached 5.59 trillion Yuan, up by percent from last year. Settlement amount recorded in China Securities Index totaled trillion Yuan, increasing by percent on a year-on-year basis, among which the settlement amount of spot trading reached 1.01 trillion Yuan, increasing by percent; while that of repurchase amounted trillion Yuan, rising by percent year-on-year. From the type structure of spot trading in inter-bank bond market, the spot trading settlement amount of credit bonds accounted for 49.90%, dropping by percent year-on-year; the spot trading settlement amount of policy bank bonds accounted for 30.98%, 17

18 decreasing by percent year-on-year; the settlement amount of central bank notes accounted for 2.51%, decreasing by percent; while that of Treasury bonds and local government bonds accounted for 13.74%, dropping by percent. The settlement amount of commercial bank counters reached hundred million Yuan, increasing by percent over last year. Part Four Bond Market Operational features. I. The Regulation and Standardization of Bond Market Has Been Strengthened In the beginning of 2013, to regularize commercial banks wealth management and investment business, to protect the legitimate interest of investors, and to promote the sound development of bond market, China Banking Regulatory Commission published the Document No.8, which aimed to control the rapid increase of non-standard asset business including credit assets, trust loans and entrusted creditor s right etc., in order to avoid risks effectively. On the 27 th of August, People s Bank of China published the Notice No. 12: strengthened the DVP rules in the inter-bank bond market, and required the market participants establishing prudent inner control system, making clear of the duty of every position, standardizing the operational process, 18

19 enhancing the risk avoidance, and improving the efficiency of the market. II. The Significant Innovative Achievements in Bond Market The significant innovative achievements of 2013 mainly lay in several aspects: firstly, the first sustainable corporate bond and the first sustainable medium term note were issued in October and December. Secondly, the inter-bank bond market introduced NCD in December. Thirdly, apart from the role of the first sustainable MTN, the State Power Corporate Bond issued in December used the CCDC inter-bank Treasury Bond Yield Curve as the benchmark, which was a reflection and promotion of the Decision of the Third Plenary Session of the 18th Central Committee of the Communist Party of China: to improve the Treasury Bond Yield Curve which can reflect on the demand and supply of bond market. III. The development of Public Bond Issuance has been slowed down, while Private Bond Issuance has been accelerated The credit bonds had developed steadily. By the end of December 2013, 3,840 billion of credit bonds had been issued, with a year-on-year growth of 2.81%, counting for 45.60% in the inter-bank bond market, 19

20 which decreased by 3.05%. The subsistent credit bonds reaches 9,020 billion, with a year-on-year growth of 22.49%, counting for 31.53% of the inter-bank bond market, which increased by 2.62% compared with last year. To be specific, the rapid development of Public-issued Bond had not been continued, and the issuance of main categories had decreased or just increased a little bit: the issuance of corporate bond and MTN has decreased by 26.88% and 15.17% year on year separately. The issuance of CP has increased by 4.48% year on year. However, the Private-issued Bonds developed rapidly. Since May 2011, the first PPNs been introduced, the scale has been increased largely. By the end of December 2013, the subsistent PPNs has reached billion. In the year of 2013, billion of PPNs have been issued, increasing by 48.64%, and counting for 14.75% of the whole issuance of inter-bank bond market. Since April, the central bank regularized the trading of inter-bank bond market, the insensible trading behaviors including trading for volumes, bonds entrustment, concealing of loss and interest-tunneling had been controlled, and the liquidity of credit bonds dropped. From the respect of clearing volume, the bond trading volume was 21,060 billion, decreased by 37.03% year on year. 20

21 IV. Money market funds and bank s wealth-management products developed rapidly, while bond funds shrank According to Wind Info., the number of bank s wealth-management products issued in 2013 is 44,587, increased 37.7% comparing with the number in According to the statistics shown in The 2013 Report of Chinese Bankers Survey, the amount outstanding of bank s wealth-management products has reached 10,000 billion Yuan, increased more than 40.8% comparing with the 7,100 billion in No matter from the view of number of issuance, or the amount of assets managed, bank s wealth-management product market got rapid expansion in On the other hand, money market funds met new developing opportunities, and especially as the innovative money market funds supported by internet platform or electronic business appeared, money market funds blossomed in both scale and performance. According to the statistics shown in Wind Info., money market funds have become the major force in the increasing scale of funds in Till December 31 st, 2013, the number of money market funds shares is billion, increasing billion from the same time of last year, which is the largest increasing number of shares comparing with other type of funds (including stock funds, mixed funds, bond funds and other funds). For the amount of assets, money market funds also have the largest amount increased. Till December 31st, 2013, the net asset value reached

22 billion Yuan, increasing billion Yuan from the same time of last year. And money market funds got the average yield of 3.96%, which is a good level in the background of high financing interest rate caused by QE exiting expectation and tight money condition in the 2 nd half year. Comparing with the highlighted money market funds, the performance of bond funds was rather poor and attracted less attention. The sharp decline of bond market in the 2 nd half of 2013 leaded to a rapid shrinking of the accumulated earnings of bond funds from the 1 st half year. The average yield level in the entire year is only 0.82%. The performance in fund shares and asset amount is also unsatisfactory. Till December 31 st, 2013, the number of fund shares reached and net asset value reached billion Yuan, lower than money market funds by billion and billion Yuan, respectively. V. The cost of bond issuance increased The bond issuing rate in the 1 st half of 2013 is rather stable, however, from the 2 nd half of the year, the demand of bond investment declined, the issuing interest rate continued to rise, and the cost of issuance increased. The tender interest rates at different maturities of Treasury Bond and Policy Bank Bond both reached the historical highest point in November. Some phases of Policy Bank Bond postpone issuance due to the high issuing interest rate. For example, the tender interest rate of 50-year 22

23 Treasury Bond increased 107 BP s from 4.24% in May to 5.31% in November, recording the highest in the history of 50-year Treasury Bond issuance. The tender interest rate of 10-year China Development Bank Bond increased 89 BP s from 4.15% in April to 5.04% in the end of October. Figure 11: Trend of 10-year Treasury Bond s tender interest rate and Chinabond 10-year Treasury Bond yield curve in Source: Figure12: Trend of 10-year China Development Bank bond s tender interest rate and ChinaBond 10-year Inter-bank fixed-rate policy bank bond (China Development Bank) yield curve in Source: 23

24 The cost of issuance of credit bonds also showed a clear upward trend. Taking the 5-year Mid-term Note whose body credit rating is AAA as an example, the tender interest rate in the 1 st half year was stable, almost remaining in the range between 4.5% and 5%, however, in the 2 nd half of the year, tender interest rate kept on climbing, passing over 6% in November, and reaching the highest of 6.4%, which increased 156 BP s from the lowest point of 4.84% in the beginning of the year. The average tender interest rate of AAA-rating 5-year Mid-term Note is 5.08%, increased 30 Bp s from 4.78% of the last year. At the same time, although National Association of Financial Market Institutional Investors have relaxed the guidelines of tender interest rate of Mid-term Note and Commercial Paper, tender interest rate was still higher than the rate in the secondary market. There was still a spread between primary market and secondary market. Statistics show that, the average spread between primary market and secondary market of AAA 5-year Mid-term Note is 10 BP s, narrowed by 5 BP s comparing with

25 Figure 13: Trend of 5-year Mid-term Note s tender interest rate and ChinaBond interbank 5-year CP&note yield curve in Source: Tender interest rate increased for the following reasons: first, monetary policy was neutrally tight, and money condition in interbank bond market was relatively tight, especially after the abnormal high volatility of money market interest rate appeared in June, the extreme cautious expectation of market liquidity leaded to the decline in the demand of bond investment and the rise of interest rate; second, under the regulating pressure of capital management and liquidity management, commercial banks more and more made use of off-balance sheet business to ease the pressure from on-balance sheet items, which leaded to larger money multiplier and prosperity of borrowing and lending market. However, as wealth-management and inter-financial institution businesses were regulated, off-balance sheet business got tight, and rapid expanding money supply lost its power, which ended up in tight money condition and the rise of yield; third, in the process of interest rate 25

26 marketization, the financing cost of commercial banks increased gradually. To maintain the original spread, commercial banks lift the expected return of bond investment. As the main body in the bond market investment, commercial banks possessed the pricing right of bond investment, which leaded to the overall increase of interest rate in the core area of bond market. VI. Bond index fund got further developed Although the performance of bond funds was relatively sluggish in 2013, but for bond index fund, its diversified risk, relatively stable yield, lower costs of management and trading, convenience for investors allocation, and also any other advantages attracted the attention of market. Under the support of related policies, bond index funds got rapid developed. Till the end of 2013, statistics showed that, 7 bond index funds has been issued in this year, whose amount was more than 20 billion Yuan, almost 23 times of the issuing amount in As the process of domestic capital market internationalization speeding up, and related regulating authorities expanding the investment quota of QFII (Qualified Foreign Institutional Investors) and RQFII (RMB Qualified Foreign Institutional Investors), there is still great potential for bond index funds in the future market. 26

27 Figure 14: Issuance of bond index funds in Source: Wind To reflect more detailed and more complete price trend of China bond market, CCDC kept on improving ChinaBond Index and has developed an index system with abundant indices and wide coverage. Till the end of December, 2013, statistics showed that, CCDC everyday released 285 ChinaBond indices and almost 5,000 indicators related to ChinaBond indices. Besides, CCDC always strived to improve ChinaBond VaR products. In 2013, CCDC applied cloud computing technique into ChinaBond VaR products, which significantly improved the system s computing efficiency. CCDC also started customized portfolio VaR service for banks and stock companies, which better satisfied customers need. 27

28 VII.The degree of bond market opening to outside was further strengthened Since in 2010 the People s Bank of China released Notice of the People s Bank of China on the matters concerning the pilot program that three types of institution including foreign RMB clearing banks use RMB to invest in interbank bond market, and also since the implementation of RQFII system in 2011, the number of foreign institutions joined in the interbank bond market increased rapidly in recent years. Especially in the influences of many positive measures of financial market opening to outside released in 2013, 93 foreign institutions has opened bond accounts in CCDC by the end of 2013, which increased 43.08% comparing with the number at the same time in last year. Figure 15: the number of accounts in CCDC opened by foreign institutions in Source: 28

29 Part Five. Suggestions on the Development of the Bond Market in 2014 Look forward at 2014, the trend in bond market prices is hardly optimistic. The recent Central Economic Work Conference pointed out explicitly that seeking progress while maintaining stability is the general tone of the next year s economic work and, therefore, the government will continue to implement a positive financial policy and a moderate monetary policy; as a result, the GDP in 2014 is expected to continue its weak recovery while inflation is expected to continue its mild rise. As regards the external environment, as the recovery of American and European economy becomes more evident, considering factors such as the U.S. Federal Reserve s secession from QE, the scale of increase in funds outstanding for foreign exchange is predicted to fall. As regards monetary market interest rates, money management products and online financial products, the marketization of whose interest rates has been accelerating, and whose scale has been rising, will elevate banks debt risks and result in an increase in banks risk preference. The battle in attracting deposit is still going to happen. Therefore, the overall levels of interest rates in 2014 may well fluctuate at high levels as before. 29

30 I.Further Improve Market Mechanisms and Perfect the Treasure Bonds Yield Curve. The 3 rd Plenary of the 18 th Communist Party of China Central Committee demonstrated the next step in the development of the bond market by proposing, for the first time, perfecting the Treasure Bonds Yield Rate Curve, which reflects the supply and demand in the market. As the basis of the Treasure Bonds Yield Rate Curve is the development of the bond market, in order to perfect the curve, the government should begin with improving the institutions and mechanisms of our country s bond market by further promoting market reform and innovation, increasing the diversity of the market s participants, increasing the liquidity of the sub-markets including the treasure bond market, reduce transactional costs, realize the integration of the bonds and the market, and increase the efficiency of the pricing of transactions. Specifically, the government could begin with the following aspects: 30

31 (i). Improve the stratification mechanism of the inter-bank bond market. (ii). Strive to develop publicly raised bond funds. (iii). Further improve market maker mechanisms. (iv). Increase the frequency of the rolling release and of the renewal of long-term, key term treasure bonds. (v). Make the tax system of the bond market fairer. (vi). Encourage the market s innovations in utilizing the Treasure Bonds Yield Curve. II.Maintain Appropriate Liquidity After the adjustment of banks profit model and societal financing structure, the injection of an appropriate degree of liquidity will be beneficial to the bond market s departure from the shadows of a bearish market and the balance of financial and substantial economies, as well as promote the construction of public rental housing, reducing the rigid demand on housing, reducing the demand on capital in real estate speculation, and thereby contribute to the fall of housing prices and finally reduce the refinancing rate. 31

32 III.Enhancing the Transparency of Privately Raised Bonds In recent years, the booming development of privately raised bonds raised more and more concern on their lack of transparency. The public disclosure of financial information of privately raised bonds will assist general investors and many third-party institutions in discovering false information in the financial information of businesses, thus help reveal risks and stabilize the market. IV. Enhance the Centralization of Bond Depositing Currently, decentralized depositing in the bond market has led to reduplication of development, waste of resources, the lack of standardization and difficulties in monitoring and statistics. The current situation goes against the risk monitoring in the bond market. V. Reform in the Pricing Mechanism of Deposits We advise accelerating the reform in the deposit insurance system and the marketization of deposit interest rates, and comprehensively straightening out the pricing mechanism of capital. 32