The Main Difference Between Corporate Bonds And Corporate Bonds

After 1994, although quite a number of state-owned enterprises carried out the reform of the company system, the name of the company was also hung up with the word "two". Therefore, it seems that corporate bonds are synonymous with corporate bonds, but in fact, as the State Planning Commission only invested in the investment and financing arrangements of government departments and state-owned enterprises, no matter the similar activities of non-state-owned enterprises, corporate bonds began to be restricted in the state-owned sector of the economy. Compared with the number of companies, the bonds issued by them were much narrower than those of corporate bonds. In the middle of 1990s, in some places, the risk of corporate bond maturity was difficult to meet principal and interest risks, and the State Planning Commission had approved the right to examine and approve corporate bonds, thus forming a pattern of centralized management and approval of corporate bonds by the State Planning Commission. This historical process shows that corporate bonds are not corporate bonds.

From an analytical point of view, bonds issued by an enterprise There are several major differences between corporate bonds and corporate bonds.

First, the difference between the issuers. Corporate bonds are issued by Limited by Share Ltd or limited liability companies. In 2005, the company law and the Securities Act also made clear provisions. Therefore, non corporate enterprises are not allowed to issue corporate bonds. Corporate bonds are bonds issued by the central government departments, wholly state-owned enterprises or state holding enterprises, and their restrictions on the issuers are much narrower than corporate bonds. There are hundreds of thousands of Companies in China, and there are only more than 20 state-owned enterprises. In developed countries, the issuance of corporate bonds is a statutory power category of the company. It does not require approval by government departments. It only needs to be registered. Whether the issue is successful or not is basically determined by the market. Unlike this, the issuance of all kinds of government bonds needs to be approved by authorized authorities through statutory procedures. [next]

Second, Bond Fund Differences in usage. Corporate bonds are bonds issued by the company according to the specific needs of operation and operation. Its main uses include fixed asset investment, technological renovation, improvement of the structure of company's capital sources, adjustment of company assets structure, reduction of company's financial cost, support for company mergers and acquisitions and asset reorganization, etc. so, as long as it does not violate the relevant regulations, how to use bond funds is almost entirely the issue of the issuing company itself, without the concern and approval of the government departments. But in China's corporate bonds, the purpose of issuing bond funds is mainly limited to fixed assets investment and technological innovation and transformation, and is directly related to projects approved by government departments.

Third, the difference of credit basis. In the market economy, the asset quality, operating status, profitability level and sustainable development ability of the issuing company are the credit basis of corporate bonds. Because the specific circumstances of different companies are not the same, there are many differences in the credit level of corporate bonds. Accordingly, the bond prices of each company and the cost of issuing bonds are significantly different. Although the guarantee mechanism can enhance the credit level of corporate bonds, this mechanism is not mandatory. Different from this, China's corporate bonds not only carry out government credit through the "state" mechanism, but also enforce the guarantee mechanism through administrative compulsion, so that the credit level of corporate bonds is much the same as that of other government bonds.

Fourth, Control procedure The difference. In a market economy, the issuance of corporate bonds is usually carried out by registration system, that is, as long as the registration materials of the issuing company comply with the regulations of the law and so on, the supervision organ has no right to restrict its issuing behavior. Against this background, the main activities of the regulators in the bond market are concentrated on examining the legality of the issuing materials, strictly assessing the credit rating of the bonds, supervising the information disclosure of the issuers and the activities of the bond market. However, in the issuance of corporate bonds in China, the issuance of bonds needs to be submitted to the State Council for examination and approval by the national development and Reform Commission. Due to the worry that state-owned enterprises issue bonds to lead to related risks and social problems, in the relevant information of issuing bonds, not only the debt of the issuing enterprises can not exceed 40% of the net assets, but also require banks to guarantee them, so as to prevent and control risks. This phenomenon of "living alone or doing business" shows that this regulation mechanism does not conform to the inherent requirements of the market mechanism.

Fifth, the difference of market functions. In developed countries, corporate bonds are a main way for all kinds of companies to obtain medium and long-term debt funds. In the 80s of last century, corporate bonds became an important force to promote financial disintermediation and interest rate liberalization. In our country, because corporate bonds are actually government bonds, their issuance is strictly controlled by the administrative mechanism. Not only the amount of issuing bonds next year is much lower than that of treasury bonds, central bank bills and financial bonds, but also significantly lower than the amount of stock financing. Therefore, it plays a negligible role in the financing of many enterprises or in the financial market and financial system.