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Original title: Editorial 丨 Strengthening confidence in the bond market and urging market entities to fulfill their responsibilities
In accordance with the requirements of fully governing the country by law, resolutely maintain the authority of the legal system, implement oversight responsibilities and territorial responsibilities, and urge the various market entities to strictly comply with their responsibilities.
After the uncertainty generated by the default of the debt of Yongmei Coal and other companies triggered a chain reaction in the market, on November 21 Liu He, member of the Political Bureau of the CPC Central Committee, Deputy Prime Minister of the State Council and Director of the Financial Stability and Development Committee of the State Council (hereinafter, 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 115 trillion yuan stock bond market is an important part of China’s capital market, and China is increasing the scale of direct financing, strengthening the transmission of monetary policy and the yield curve through the capital market. bonds and improving the ability to serve the real economy. The market has affected investor confidence and jeopardized liquidity due to one or two cases, which not only affects the stability of the financial system, but also has a certain impact on China’s economic reform and development. .
Therefore, this meeting will undoubtedly eliminate the uncertain behavior in the bond market with supervisory authority, strengthen the rules and order, avoid the herd effect and avoid a greater spread and diffusion of credit risks in the short term.
The Financial Commission responded to the reasons for the recent increase in non-compliance, mainly “the result of the superposition of cyclical, institutional and behavioral factors.” Governance requires “adhering to the general tone of seeking progress while maintaining stability and in accordance with the principles of commodification, rule of law and internationalization, properly managing the relationship between promoting development and preventing risks, and promoting the sustainable and healthy development of the bond market “. It can be said that the quantity of legumes is accurate and that the right medicine is prescribed in the hope of curing 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 cleaning phase of leverage and it is inevitable that some companies will default. Cyclical factors only increase the risk of market default, at present the most important thing to consider is the uncertainty caused by institutional and behavioral factors. First, these state-owned companies, local governments, and state assets constitute a “just redemption” credit system as a whole as a given. Second, behavioral factors refer to the existence of fraudulent issuance, disclosure of false information, malicious transfer of assets, misappropriation of issuance funds, etc. behavior.
To eliminate the above uncertainties, each market entity must “assume its own responsibility”, standardized and market-oriented development, the rule of law and maintain the stability of the bond market. First, financial regulatory authorities and local governments must resolutely maintain the authority of the legal system, implement regulatory and territorial responsibilities, and urge the various market entities to strictly comply with their responsibilities in accordance with the requirements of the State of comprehensive law.
With regard to behavioral factors, the Finance Committee maintains a “zero tolerance” attitude and demands a serious investigation and sanction of fraudulent issuance, disclosure of false information, malicious transfer of assets, misappropriation of issuance funds. and other illegal activities in accordance with the law, and severe penalties for all kinds of “debt evasion.” Protect the legitimate rights and interests of investors and maintain fairness and order in the market. At the same time, the Financial Commission requires that bond issuers and their shareholders, financial institutions, intermediaries and other market entities strictly comply with the laws, regulations and rules of the market, adhere to professional ethics, diligence, honesty and reliability, effectively prevent moral risks and strengthen market discipline mechanisms.
In fact, market risk this time is not only the responsibility of market entities, some financial institutions, intermediaries and other market entities are also risk generators. For example, Haitong Securities, Industrial Bank, Everbright Bank, Zhongyuan Bank, etc., which were suspected of helping Yongmei issue bonds through structural bonds, have been the subject of regulatory investigations. China Chengxin International Credit Rating Co., Ltd., Sigma Certified Public Accountants, etc. The behavior of self-regulation rules in the bond market. Once these intermediaries and financial institutions are shown to violate professional standards, they must assume the corresponding responsibilities.
The responsibilities of each must comply with the principles of commercialization, rule of law and internationalization, and standardize the development of China’s bond market. It is not about continuing to strengthen rigid exchanges in the name of ensuring market order. In particular, the current economy is under cyclical pressure, added to the unexpected impact of the epidemic, which has deteriorated the credit rating of some companies, which is why this macro objective environment must be considered.
These require regulatory authorities to crack down on all kinds 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 should pay attention to market-based default risk. Early warning and elimination mechanisms strengthen thorough investigation of hidden risks and firmly maintain the bottom line to avoid systemic risks. In the long term, we still need to deepen the reform and opening 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.
