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Original title: Editorial 丨 Building trust in the bond market and soliciting market entities to fulfill their responsibilities
In accordance with the requirements of a comprehensive government of the country by law, resolutely maintain the authority of the legal system, implement regulatory responsibilities and territorial responsibilities, and urge various market entities to strictly carry out their responsibilities.
After the uncertainty caused by the debt default of Yongmei Coal and other companies triggered a chain reaction in the market, Liu He, a member of the Political Bureau of the CCP Central Committee, Vice Premier of the State Council and Director of the Financial Stability and Development Committee of the State Council (hereinafter referred to as the Financial Committee) chaired the meeting. The 43rd meeting of the Finance Committee studied and regulated the development of the bond market and maintained the stability of the bond market.
The bond market with a stock of 115 trillion yuan is an important part of the Chinese capital market, and China is increasing the scope of direct financing, strengthening the transmission of monetary policy and the yield curve through the bond market and improving the capacity to serve the real economy. The market has affected investor confidence and jeopardized liquidity due to one or two cases, which not only impact on the stability of the financial system, but also have some impact on China’s economic reform and development.
Therefore, this meeting will undoubtedly eliminate the uncertain behaviors in the bond market with the supervisor, strengthen rules and order, avoid the herd effect and avoid the further spread and spread of credit risks in the short term.
The Finance Commission provided answers to the reasons for the recent increase in default cases, mainly “the result of the overlap of cyclical, institutional and behavioral factors”. Governance requires “adhering to the general tone of the pursuit of progress while maintaining stability and, in accordance with the principles of commercialization, the rule of law and internationalization, managing the relationship between promoting development and preventing risk and promoting development sustainable and healthy bond market “. It can be said that the number of pulses is accurate and the right drug is prescribed, hoping to cure the disease, but market governance also takes time.
The overlap of cyclical, institutional and behavioral factors has created uncertainty in the market. The cyclical factor is the law of the market: the current economy is in the process of deleveraging and it is inevitable that some companies will default. Cyclical factors only increase the risk of market default, but currently the most important thing to watch out for is the uncertainty caused by institutional and behavioral factors. First of all, these state-owned enterprises, local governments, and state-owned assets constitute a “buy-only” credit system as a whole as a matter of fact. Second, behavioral factors refer to the fact that some firms have fraudulent issuances, disclosure of false information, malicious transfer of assets, misappropriation of issuing funds, etc. behavior.
To eliminate the above uncertainties, each market entity must “take responsibility”, market-oriented and standardized development, the rule of law and maintain the stability of the bond market. First of all, financial regulators and local governments must resolutely maintain the authority of the legal system, implement regulatory and territorial responsibilities, and urge various market entities to rigorously carry out their responsibilities in accordance with the requirements for a state. of global law.
Regarding behavioral factors, the Finance Committee maintains a “zero tolerance” attitude, calling for serious investigations and punishments for fraudulent issuance, disclosure of false information, malicious transfer of assets, embezzlement of issuing funds and other illegal activities in compliance with the law and severe penalties for all types of “debt evasion”. Protect the legitimate rights and interests of investors and maintain fairness and order in the market. At the same time, the Finance Commission requires bond issuers and their shareholders, financial institutions, intermediaries and other market entities to strictly abide by market laws, regulations and rules, uphold professional ethics, be diligent, honest and reliable, effectively prevent moral risks and strengthen market discipline mechanisms.
Indeed, this time the market risk is not only the responsibility of market entities, but also some financial institutions, intermediaries and other market entities. For example, Haitong Securities, Industrial Bank, Everbright Bank, Zhongyuan Bank, etc., suspected of helping Yongmei issue bonds via structural bonds, have all been subject to regulatory investigations. China Chengxin International Credit Rating Co., Ltd., Sigma Certified Public Accountants, etc. The behavior of the self-regulatory management rules in the bond market. Once these intermediaries and financial institutions have been shown to violate professional standards, they should assume the corresponding responsibilities.
Every responsibility is to respect the principles of marketing, rule of law and internationalization and to standardize the development of the Chinese bond market. It is not about continuing to strengthen rigid trading in the name of ensuring market order. In particular, the current economy is under cyclical pressures, associated with the unexpected impact of the epidemic, which has deteriorated the creditworthiness of some companies, this objective macro environment must be considered.
These require regulators to crack down on all types of illegal activities in accordance with the law, protect the legitimate rights and interests of investors and maintain fairness and order in the market; on the other hand, they must pay attention to the market-based default risk. All departments should coordinate and cooperate to improve prevention, detection and early warning and elimination mechanisms strengthen the thorough investigation of hidden risks and firmly maintain the goal of avoiding systemic risks. In the long run, we still need to deepen the reform and opening up of the bond market, strengthen the function of serving the real economy, deepen the reform of state-owned enterprises, and improve the quality and efficiency of operations.
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