Bond Market Financing Hits 36.2 Trillion Yuan in 2021 on the Back of Reform and Opening Measures

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The Chinese bond market has seen robust growth since the start of 2021, with observers pointing to ongoing reform measures as a key driver of expansion.

As of 8 August Chinese bond market financing in 2021 stood at 36.2 trillion yuan (approx. USD$5.58 trillion), for YoY growth of 12.3%, according to data from iFinD.

Pan Helin (盘和林), acting head of the Digital Economics Research Institute of the Zhongnan University of Economics and Law in Wuhan, said to Securities Daily that there were four key drivers of strong growth in Chinese bond market financing in 2021:

  1. Opening up has attracted more external liquidity, particularly following the inclusion of China in more international bond market indices;
  2. Improvements to bond trading mechanisms and systems opening up channels for bond market liquidity. This includes improvements to derivatives instruments and market standardisation.
  3. Stabilization of monetary policy has been of benefit to reducing the cost of funds, shifting the risk preferences of investors, and thus increasing demand for bond market investment.
  4. Pension funds and social security funds have expanded their bond ratios, actively entering the bond market.

Pan highlighted the launch of a range of measures by the Chinese government since the start of the year to drive the reform and growth of the domestic bond market, including:

  • Improvements to the corporate bond information disclosure system;
  • Reform of the corporate bond registration system;
  • Optimization of exchange bond trading regulations.

6 August also saw the release of the “Notice Concerning Expediting the Healthy Development of the Bond Market Credit Ratings Sector” (关于促进债券市场信用评级行业健康发展的通知) by a range of top government bodies, including the Chinese central bank, the National Development and Reform Commission (NDRC), the China Banking and Insurance Regulatory Commission (CBIRC) and the China Securities Regulatory Commission (CSRC).

Authorities said that they hope that the Notice will drive an increase in the quality of credit ratings, support the stable growth of the bond market, as well as drive ratings agencies to “pragmatically play their role as watchmen of the bond market.”

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