The Development And Achievements Of The Local Currency Bond Markets In East Asia

Before 1997, East Asia local currency bond markets were in the state of spontaneous development, which were inadequate both in scope and in depth. Since the 1997 financial crisis, East Asia has taken many measures at different levels to process regional financial cooperation in order to prevent the recurrence of crises. One important aspect is to vigorously develop the East Asia local currency bond markets, because it is considered easily to achieve subtractive progress. Based on previous studies, this paper attempts to point the theoretical and political foundations of the development of local currency bond markets in East Asia, reveal the characteristics of the local currency bond markets, estimate the developing effects of East Asia local currency bond markets, and explore the markets'further roadmap.There are five chapters in this paper. The first chapter is introduction. We review some related concepts about East Asian bond markets then definite the researching object—local currency bond markets. It also includes some related previous studies and the framework of this paper. This is followed by some basic issues regarding desirability and feasibility of the development of local currency bond markets in East Asia in Chapter 2. The theoretical rationales answer why the local currency bond markets in East Asian must be developed and the political rationales explain why they may be developed. The current situation of East Asia local currency bond markets has been examined in Chapter 3. In terms of market scale (quantity), absolute size in each market has expanded more quickly than what it was pre-crisis. In terms of market characters (quality), there are many deficiencies in East Asia local currency bond markets: unbalancing structure, limited liquidity, diversified returns (or yield), and bundled markets. In short, there is a long distance for East Asia local currency bond markets to become developed bond markets. Quantitative approach is used to estimate the achievements of local currency bond markets in Chapter 4. The objectives of development of local currency bond markets are to mitigate the currency mismatch, improve the Asian financial system vulnerabilities and promote financial integration within East Asia. Our conclusion is that the development of local currency bond markets in East Asia has achieved the desired objectives, to some extent. At the end, a roadmap for the development of local currency bond markets is explored in Chapter 5. It suggests that the markets should move forward through public-private sector partnership and handle the relationship between the development of local currency bond markets and the development of regional bond market in order to better prospects. Under the current circumstances, integration of each local currency bond markets then timely development of regional bond market is a feasible way.