The Research On Pricing Mechanism Of China Corporate Bond's Issuing Market

A sophisticated and efficient corporate bond market is instrumental to the smooth running of investment and financial system, so as to fasten the development of financial market and the growth of national economy. This article is focusing on the basic and most important issues for bond market development- the issuing pricing mechanism of corporate bond. The issuing pricing mechanism of corporate bond is the foundation of the corporate bond market, so it is important to study the mechanism of China corporate bond's issuing pricing and give suggestions for the market oriented reform on the pricing mechanism. Moreover, the study not only is helpful to the effective operation of corporate bond issuing market, but also makes effective connection between primary and secondary markets of corporate bonds, contributing to the healthy development of the whole corporate bond market.To begin with this essay, some comments and analysis are given to the current theories and studies on bond pricing both in and outside of China. I believe they can serve as guidance to the pricing of corporate bond in China. Then the essay makes side-by-side comparison analysis on the pricing mechanism of corporate bonds between China and USA, pointing out the existing problems in China. By examples and case studies, this essay further demonstrates the inefficiency of the pricing mechanism in China corporate bond's issuing market. To address those problems and improve the efficiency, the essay recommends market driven approach on initial pricing of corporate bond and offered more concrete measures for bond market operation: loosening up the interest rate control, floating the interest rate of long-term bond, fastening the pace of establishing a basis interest rate benchmark, building well recognized credit rating system, adopting risk weighted interest rate as discount rate, and promoting various market oriented pricing method.There are two innovative points in this essay: (1) Summarizing the main theories of bond pricing, with which to guide the pricing policy of China corporate bond. (2) By demonstrations and comparison, made in-depth analysis on the inefficiency of current pricing mechanism of China corporate bond's issuing market, and pointedly presented detailed policy suggestions.Due to time and capability limit, there are still areas for improvements, e.g. - the reasoning between bond pricing theories and the pricing operation could have gone into further depth and more details. However, the author hopes this article can makesome basic contributions to the market oriented reform on the pricing mechanism of China corporate bond's issuing market.