Based On The Comparison Of China's Corporate Bond Issue Mechanism Research

Corporate bond is a tool used for direct financing. It’s also a fixed income security. Due to some historical reasons, the development of Chinese corporate bond market is relatively lagging behind. As all the behaviors and actions in financial markets are initiated by issuance, this article focuses on the mechanism of corporate bond issuance in China by drawing comparisons of two dimensions:comparing China’s emerging corporate bond market with its stock market which has developed for many years, and comparing the practice in China with that in US, which is one of the most developed security markets in the world. By comparing requirements for issuance, as well as the process of issuance, I made an in-depth analysis of the roles of different market parties including issuer, intermediaries, investors and regulators in the course of the operation of the entire mechanism, and explored the logics behind their actions. Based on the comparisons and analysis, I proposed some suggestions on the technical level for the development of China’s corporate bond market.I firstly analyzed the requirements for China’s corporate bond issuance and that of stock and found that compared to the stock, the requirements for corporate bond issuance set by CSRC are more formal, specific than stock, and can be quantified. Based on the nature of the two securities, I analyzed the different roles of them in the capital markets some steps further, and paved the way for the following comparison and analysis of issuance process.Then, I used a flow chart to visually compare the difference of China’s corporate bond and stock issuance process, and summarized the steps with obvious differences:underwriting, due diligence investigation, credit rating, restructuring guidance before listing, terms designing and pricing. I analyzed the different meanings of these six aspects of bond and stock, and the reasons for the differences between the two in practice. In this section, I also counted the stocks issued by the109corporate bond issuers to reveal the choice of the two-security-issued companies in the timing of issuance as well as the choice of underwriters, and the motivations behind them. In the second dimension, China-US comparison, what I found is that on one hand in both the general requirements for issuer and the issuance process, US has much lower degree of regulatory control, which means that in US, the market mechanism itself plays a much greater role than in China. On the other hand, SEC has more regulations-concerning the default of issuers. Although there is no doubt that the direction of development of China’s corporate bond market in the long run must also be weak regulatory and strong market, there is also a need for Chinese authorities concerned to take account the default situations. Based on the reality of the situation and the previous analysis, I proposed some suggestions for the development of China’s corporate bond market to this target with some specific paths. Finally, I summarized the two dimensions of the comparisons and found the reasons and logics behind them, then summed up the specific operational steps of the development of China’s corporate bond market. This is also the most important value and contribution of this article.