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China Global Debt Capital Markets Congress

China Bond Market Analysis Report

Second Quarter 2010

 

Summary

In the second quarter, the global economic recovery has slowed down, the European sovereign debt crises is far from an end, and the international financial market is increasingly unsteady. The major economies have disagreementson the issue of the withdrawal of economic stimulus policies. The economic situation remains very complicated. The domestic economy maintains a good situation on the whole under the active regulation and control. However, the growth of domestic economy slows down because of the influence of multiple regulation and control policies in areas such as real estate, local financing platform, energy saving and carbon emissions reduction etc.. Currently, the export is facing multiple risks including the foreign demand shrinkage. As the consumption is hard to make breakthroughs, the investment will still be a crucialfactor in the economic growth. As the economic growth slows down, "sustaining economic growth" will become the primary concern for macro-economic regulation and control in the second half of this year. The third quarter is expected to be the time window of slight adjustments of the regulation and control policies.

 

On the whole, China's bond market in the second quarter maintains a healthy and rapid development.  On the one hand, it provides a strong support for the implementation of the proactive fiscal policy and moderately loose monetary policy; on the other hand, it continues to play a positive role in the financing for enterprises and the operation of the real economy. In the second quarter, the issuance volume of  various types of bonds reach 2.92 trillion yuan, up 24.21% (quarter on quarter); the market outstanding volume grows steadily, reaching 19.7 trillion yuan till the end of June, up 6.53% (quarter on quarter); the market overall transaction volume stands at 38.8 trillion yuan, up 24.85% (quarter on quarter ). When the growth of the macro economy slows down and the capital is relatively loose on the whole but tight in some specific stages, the short side of the bond yield curve goes up but the long side goes down, showing a flattening move.   

 

The debt financing instrument market of non-financial enterprises runs smoothly in the second quarter, with the scale of the market growing steadily. It coordinates effectively with macro-economic policies, plays an important role in the adjustment of economic structure, improvement of social financing structure, and the support for the development of the real economy. In the second quarter, the issued debt financing instruments of various types reach 437.7 billion yuan, up 14.37% (quarter on quarter); the market outstanding volume reaches 3.2859 trillion yuan, up 11.40% (quarter on quarter).

 

In the third quarter, the scale of the bond market is expected to continue the steady growth; the regulatory system and market mechanism to promote the healthy development of the market will be further improved. In the context of the slowdown of the demand and the strain of the capital, the bond yield curve is expected to be upward gradually. In terms of the debt financing instruments of non-financial enterprises, driven by the market demand, the ways of issuance will become diversified step by step, and the credit risk mitigation instrument is expected to be available. The financing scale of the SMEs will expand gradually, and the market oriented evaluation of intermediaries will be conducted orderly.