In order to thoroughly implement the guidelines of the Fifth Plenary Session of the 19th CPC Central Committee and the Central Economic Work Conference, improve the legal system of the bond market, and build a multi-tiered bond market system that features robust regulation, orderly competition, transparency and openness, the People’s Bank of China (PBC), the National Development and Reform Commission (NDRC), the Ministry of Finance (MOF), the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange (SAFE) jointly issued the Guiding Opinions on Advancing the Reform, Opening-Up and High-Quality Development of the Corporate Credit Bond Market (hereinafter referred to as the Opinions).
As noted in the Opinions, in recent years, China’s corporate credit bond market, i.e., the market for enterprise bonds, debt financing instruments of non-financial institutions, and corporate bonds, has witnessed sound and rapid development, playing an important role in serving the real economy, optimizing resource allocation, and supporting macro regulation. To further the reform, opening-up and high-quality development of the corporate credit bond market will be helpful in smoothing the national economic circulation, bringing impetus to economic transformation and restructuring, and accelerating the building of a new development paradigm.
To that end, the Opinions offers guidance in ten aspects, i.e., improving the legal system, promoting category-based convergence in the management of bond issuance and trading, enhancing the effectiveness of information disclosure, tightening regulation over credit rating agencies, strengthening investor suitability management, improving the mechanisms of pricing, enhancing regulation and unifying law enforcement mechanisms, conducting macro management in a coordinated way, advancing the building of a multi-tiered market, and promoting high-standard opening-up.
The Opinions highlights the need to continuously consolidate the foundation of the legal system of the corporate credit bond market and promote research to formulate administrative regulations on corporate bonds. In line with the principle of category-based convergence, we will gradually unify the rules and standards for issuance, trading, information disclosure and investor protection in the corporate credit bond market. The issuance of bonds shall align with China’s macroeconomic and industry development policies, while the structured issuance of bonds shall be prohibited. While adhering to the principle that sellers fulfil their responsibilities and buyers take the consequences, we will guide investors to improve their risk identification abilities. We will also make attempts to introduce mechanisms for class actions and reconciliations among concerned parties.
The Opinions requires that the Budget Law of the People’s Republic of China and its implementation provisions be strictly observed, that government responsibilities and enterprise responsibilities be clearly defined, and that distinctions be drawn between the credit capacities of different entities, such as the government, policy financial institutions, state-owned enterprises and local government financing platforms. The aim is to ensure that borrowers make repayments and bear the risks on their own, and to prevent hidden debt risks facing local governments. In cooperation with the judicial authorities and in accordance with relevant laws and regulations, we will severely punish illegal and irregular conduct, such as embezzlement of an issuer’s assets committed by its controlling shareholders or actual controllers. There will be “zero tolerance” for debt evasion, which will be severely dealt with and punished according to the law.
As stated in the Opinions, coordinated efforts will be made to advance the building of a multi-tiered bond market, improve the lines of products and instruments, increase qualified investors, and develop a multi-tiered system of trading services. We will establish, according to the law, a centralized and unified national system of registration and settlement rules, which will focus on single-level custody, with inclusive institutional arrangements for multi-level custody. We will support and encourage banks to conduct fund settlements for bond trading. Moreover, we will make coordinated efforts to synchronize the opening-up of the interbank bond market and the stock exchange bond market, and to exercise unified management of bond market access for overseas institutional investors as well as cross-border fund flows, thereby jointly promoting unified opening-up.
Going forward, the PBC, NDRC, MOF, CBIRC, CSRC and SAFE will continue to work together to implement the Opinions. Alongside efforts to conduct macro management in a coordinated way and to effectively forestall and defuse risks, we will take active steps to promote reform and innovation, steadily expand two-way opening-up, and continuously improve the capacity of the corporate credit bond market to serve the real economy.
