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Bonds market in China

 Introduction
 Definition of bond
 Growth of bonds
 Types of bonds
 Key players in bonds market
 Importance of bonds
Definition of a bond market in
 A Bond Market is a financial marketplace where debt
instruments, primarily bonds, are bought and sold to the public
and private sectors.

 The bond market is a financial marketplace where it is possible

for investors to arrange to purchase and sell various types
of debt securities that are in the form of bonds.

 A debt security refers to money borrowed that must be repaid

that has a fixed amount, a maturity date(s), and usually a specifi
c rate of interest.
 In the last two decades, China’s economy has grown at a rate of about
10% per year and its bond market has grown from virtually nonexistent
into one of the world’s largest.

 In 2015 China bond market totaled the outstanding national amount of

domestic bond market which rose by 35% about 48 trillion RMB. Which
is development to the bonds market in china.

 As China’s economy has grown, the country has developed a large and
increasingly diverse market that includes both public and private debt.
China’s bond market is now the fourth largest in the world at about
21.73 trillion CNY.
Reasons for the growth of Bonds
Market in China.
 Governments need to borrow money. They borrow money through selling
bonds to the private sector. Usually, investors are quite happy to buy
government bonds. They are seen as a safe investment and the investor gets
a guaranteed rate of interest in return.
 One of the key reasons that Chinese Bond Market tend to be developing
very fast because Chinese corporations mainly rely primarily on equity
issuance and bank loans for financing trade. Because of this Chinese
government has strong incentive to develop the bond market and encourage
corporations to raise funds to curtail credit risk in banking system.
 Infrastructure development is another important reason for the growth of
China’s bond market. Although fiscal revenues have grown up rapidly, China
still needs additional financing to fund infrastructure construction.
 In addition China’s bond market is growing from a very small base, despite
many years of rapid growth in china’s bond market, the country’s
government debt-to-GDP ratio is still relatively low.
Types of Bonds Market
1. Government bonds are issued by the Chinese Ministry of
Finance aka MOF in a wide range of maturities to finance
the government spending. Local governments in
states/provinces also issue bonds just like The USA
municipal Bonds.
2. Central bank notes are the short-term market securities
issued by the Peoples’ Central Bank of China as a tool for
implementing the monetary policy. Central Bank notes
are traded sector of china’s bond market which are usual
used in money market and liquidity management due to
its short maturities.
Types of bonds market con…
3. Financial bonds are the most actively traded
bond in china and are issued by the policy banks
i.e. commercial banks, and other financial
intermediaries. Policy banks are the largest issuers
of the bond market, this policy banks include China
development bank, export and import bank of
china and agriculture development Bank of china.
Only policy bank bonds are backed up by the
central government.
Who are the main players in bond?
The bond market involves transactions among three key players:

 Issuers: these includes entities that sell bonds to raise funds for
funding their operations. E.g. banks both local and multinational
banks and government as issuing entity.

 Underwriters: There are the middlemen/women in preparing the

legal documents for easy simplifications of the bonds. These group
include investment banks and institutions that are the leaders in the
investing business. They help the issuer by selling bonds.

 Purchasers: this group includes the individual investors who buy

bonds are and they are the main buyers of debt instruments.
Importance of bonds

 Apart from the direct effect of the bond

market on the economy, bonds also help
keep the tax rates low since the
government now has this other route to
raise money for its various needs and to
help it finance public debt.
Thank you!
Presented by
Noah Issa
Mohamed Abdalla