China's Bond Market Development Model Study

The role played by the financial market in economy growth has already been realized both in academia and by policy makers. However, while emphasizing the importance of equity market, bond markets are almost completely overlooked. Actually, a sound bond market is vital for the solidity and development of the economy, a financial system of without or with an ineffective bond market will make the economy less efficiency and, to a certain degree, more vulnerable to financial crisis.Generally, bond market can be divided into two different markets by trading modes, namely, exchange market and over-the- counter market. Thus, the fundamental question of developing the bond market is to choose the proper mode of bond market. The controversies regarding this question exist both in China and in international field. Based on the study of the usual mode of bond market as well as introducing the national and international experience, this paper applies both the theoretical and the empirical methods to the research to validate the theory frame. This paper, further more, according to the anatomy of the problems appears in China bond market, proposes a feasible model for the development of China bond market.Starting from the SCP canonical form of industrial organization theory as well as combining with practice of bond market development, this paper reinterprets connotative meanings of S,C and P, sets up the SMP analyzing framework of investor structure(S), market mode(M),and market performance(P)for bond market. Our study finds that, due to different preferences of institutional and individual...