Chinese Short-term Financing Bills Market Development Problems

Right now, China is confronted with severe challenges in the financial reformation:low efficiency of indirect financing, fast growth of money supply, difficulty oftransferring household deposits into investment and the unbalance development statusof different financial subsidiary markets etc, all of which lead to the block of thetransmission mechanism of monetary policy and difficulties in the macro economyadjustment and control. Under such market environment, the PBOC proactively pushahead the short-term financing bill which is extremely important for the financialmarket construction and the reformation of financial mechanism in China. It isexpected that this innovation would expand the direct financing channels forenterprises, adjust the unbalance distribution of direct and indirect financing, dredgethe transmission mechanism of monetary market, prevent the abnormal growth ofmoney supply, promote the harmonious development of monetary market and capitalmarket and maintain the stability of financial regime in China. In addition, enterprises,underwriters and investors will benefit greatly from the short-term financing bills aswell. After half year operation, the short-term financial bill market primarilyaccomplished the original expectation of regulatory authorities, and developed greatlycomplying with the policies and regulations. However, because of the financialenvironment, there are still lots of shortcomings and potential risks existing in themarket.The First part of this Article mainly describes the meanings of Short-term FinancingBills on the Macro Economy and the micro parts. The business will reduce thefinancing cost;promote commercial banks to adjust operation conceptions andmanners, lay importance on the fee-income business and medium & small enterprises,reinforce the construction of internal risk management mechanism;enrich theinvestment products for the market investors and funds in monetary market. Inaddition, the operation framework of financing bills markets and the operation statusduring 2005 is also mentioned in this part, through comparing the bills with thetraditional corporate bonds in issuance systems, interest rate, investment and tradingmarkets and so on.The second part of this Article is the introduction of the commercial paperdevelopment in foreign financial markets, including the framework, products anddevelopment course of the markets in US. We can refer to these in the process offormulating development strategy of short-term financing bills market.The third part of this Article mainly analyzes the existing problems of presentshort-term financing bill market: for instance the credit rating system is not advancedenough, unbalanced market development, fundamental conditions is not perfect andso on. Along with the fast development of short-term financing bill, the market will beconfronted with crisis or even suspension if these problems break out.Therefore, we should attach great importance on consummating the supportingfacilities, cultivating matured and qualified market investors, and promote themarketization of the business. The fourth part of this Article provides relatedsuggestions and solutions on the problem stated before. For instance, we shouldreinforce the credit risk control ability of the investors, regulate the credit ratingmarket, and intensify the function of credit ratings, consummate informationdisclosure mechanism and the existing regulations on short-term financing billissuance so as to promote the fast, healthy and order development of short-termfinancing bill market.