New Interpretation Of Asian Bond Market

In March 28, 2015, the national development and Reform Commission, the Ministry of foreign affairs and the Ministry of Commerce jointly issued the vision and action to promote the construction of the Silk Road Economic Belt and the maritime Silk Road in twenty-first Century (hereinafter referred to as "vision and action"), pointing out that the construction of the "one belt and one road" will abide by the purposes and principles of the UN Charter, comply with the trend of world multipolarization, economic globalization, cultural diversification and social information, uphold the spirit of open regional cooperation, strive to maintain the global free trade system and open world economy, promote orderly and free flow of economic elements, efficient allocation of resources and deep integration of the market, and carry out regional cooperation in a wider range, higher level and deeper level.

These vision not only responds to the speculation of some countries in the world on the construction of "one belt and one road", but also defines the course of action.

The vision and action also put forward in the financing part that the construction of "one belt and one road" will promote the construction of the Asian monetary stability system, investment and financing system and credit system, expand the scope and scale of bilateral currency exchange and settlement, and promote the opening and development of the Asian Bond Market.

The Asian financial crisis has exposed the fragility of the Asian financial system: first, despite the fact that Asia has the most dynamic economic activities and the largest savings and foreign exchange reserves in the world, due to the lack of a sound financial system in Asia, especially the lack of long-term financing channels, a large amount of capital has been flowing into western financial markets.

However, once Asian economies fluctuate, Western investors will quickly withdraw their capital and convert their currencies into foreign currencies, which will have a huge impact on the foreign exchange market of Asian countries, and then lead to currency crises.

Two, the Asian financial system is too heavily reliant on banks. A large number of long-term investments can only rely on bank loans, resulting in the mismatch of the assets and liabilities of the banks, resulting in a decline in financial stability in Asian countries and prone to financial crises.

It is not difficult to see that the countermeasures to prevent currency mismatch or mismatch are simple, that is, vigorously develop the capital market in the region, especially the corporate bond market.

To this end, as early as 2003, 18 Asian countries published the "Chiang Mai declaration" to promote the development of the Asian bond market.

The declaration stressed that an efficient, deep and well functioning Asian bond market is the foundation for sound and stable Asian financial system, helping to enhance the ability to resist international financial risks and reduce dependence on financial markets in western developed countries.

The construction of the Asian bond market has been supported by the world bank, the bank for International Settlements and the Asian Development Bank, and has been actively responded by East Asian countries.

In view of the fact that the bond markets of East Asian countries were not large enough to achieve the normal threshold of scale, it is feasible to build a unified regional bond market, which helps to break through the threshold of the development of a mature bond market.

Since then, the president of the Central Bank of East Asia and the Pacific has organized Member States to cooperate with the bank for international settlements. The bank for International Settlements has launched ABF1 and ABF2 respectively for fund managers and trusteeship banks, and has invested in the corporate bonds issued by the state in the US dollar sovereign debt and the local currency price.

The world bank echoed it in 2007 and launched the world.

Market local currency bond planning (GEMLOC).

China has undertaken the RMB international debt issued by the Asian Development Bank, and Japan International Cooperation Bank has issued 5 new corporate bonds priced in the local currency in Thailand, Malaysia and Indonesia.

However, the development of a regional international bond market is a systematic project that requires policy coordination in the aspects of financing culture, investor protection, market infrastructure construction and related countries in cross-border pactions, liquidation and exchange rate risks. It is far from enough to recognize the problem and have the desire to promote it, and much more detailed and in-depth work must be done.

And more importantly, the development of the Asian bond market has lacked a vision of investment projects and actions that are recognized by all countries.

Obviously, all these problems are difficult to achieve overnight.

This is why the development of Asian bond market has been slowing down since the Asian Development Bank's Asian Bond Market Initiative (ABMI) was released in 2010.

The development of the Asian bond market is an important means to strengthen East Asian economic cooperation and stabilize the financial system. We must not stop because of problems. Instead, we must constantly seek new opportunities and explore new ideas so as to continuously promote the construction of the Asian bond market.

The Asian infrastructure development bank, the BRICs Development Bank and the "one belt and one way" construction provided a new opportunity for the development of the Asian bond market.

The cooperation of "one belt and one road" is the main content of policy communication, facilities interconnection, smooth trade, financing and common people's hearts.

After the policy communication between the countries along the line, the next substantive operation is to link up the facilities, so as to achieve smooth trade and promote the common aspiration of the people.

Therefore, the premise of the "one belt and one road" construction is policy communication, the core is facilities interconnection, and infrastructure construction also needs financial support.

Infrastructure investment mostly has the nature of public goods, low return on investment and long investment cycle. Therefore, many developing countries with limited financial resources mainly solve the problem of financing by striving for preferential loans for international development financial institutions.

Although the existing international development financial institutions can play a supplementary role in the financing of infrastructure construction in emerging economies, the amount of funds they provide is very limited.

The Asian Development Bank believes that from 2010 to 2020 alone, the total investment of domestic infrastructure in Asian countries will amount to about US $8 trillion. Regional infrastructure construction also needs nearly $300 billion in investment.

Stiglitz, a former chief economist of the world bank, has also pointed out that only 33 trillion dollars will be needed in the next 25 years on the demand for infrastructure in the global energy sector.

Of this, 64% of the investment demand may come from emerging and developing economies.

In contrast, the Asian Development Bank's total loans and guarantees totaled only $91 billion 100 million between 1966 and 2007.

As mentioned earlier, some emerging economies in Asia have a relatively high national savings rate, but lack a investment and financing platform that can gather funds and use funds, and a lack of a robust investment project that can be accepted by all countries.

There is no doubt that the "one belt and one way" construction will generate a lot of investment demand, which is difficult to rely on the financing of the traditional international development financial institutions.

It is against this background that all kinds of new financing platforms such as the Asian infrastructure investment bank, BRICs Development Bank and Silk Road Fund emerge as the times require and prepare for operation.

Of course, financing platform alone is not enough. Financing is an important support for the construction of "one belt and one road".

This requires not only multilateral financial cooperation such as syndicated loan and bank credit, but also the choice of appropriate and feasible financing instruments.

Bond financing is a financing tool suitable for the characteristics of infrastructure investment, and can create new securitization debt financing instruments.

This has also provided new ideas and new opportunities for efforts to promote the development of the Asian bond market.

The new development financial institutions represented by the Asian infrastructure investment bank and the BRICs Development Bank have also become the most suitable financing entities to promote the development of the Asian bond market.

With the help of "

"Asia Pacific infrastructure investment bank and BRICs Development Bank platform and the main body issuing bonds to promote the development of the Asian bond market has the following advantages:"

First of all, the main battlefield of the "one belt and one way" construction project is in Asia, and many Asian countries have a relatively high savings rate. Especially compared with other continents, Asian investors know more about these projects and project environment.

They not only have a better understanding of the market demand and demand subdivision of infrastructure investment and financing in Asia, but also know more about the source, background, demand and Prospect of the project, which is in line with the principle of "local preference" in investment, and it is in the right place.

This is conducive to attracting more regional investors to carry out bond financing for the "one belt and one road" construction project.

Secondly, from the practice of ABF and ABMI to promote the development of the Asian bond market and the development of the bond market over the past 10 years, it is advisable to promote the development of the Asian bond market in the early stage with sovereign debt or quasi sovereign debt as the starting point.

We know that due to differences in market infrastructure such as rating norms, accounting standards, information disclosure and taxation systems, cross border issuance and trade fairs of corporate bonds are facing many problems.

For sovereign debt or quasi sovereign debt, because of the direct or implicit endorsement of governments, the risk of default is very low. Even if the market infrastructure is relatively imperfect and the degree of integration is not high, it can also be successfully issued and traded.

For example, under the organization of the central bank presidents meeting in East Asia and the Pacific region, the ABF1 program dominated by sovereign debt and quasi sovereign debt is relatively smooth, and the ABF2 program based on corporate bonds is hard to sustain.

Coincidentally, Japan International Cooperation Bank in 2004 to 2007 during the Southeast Asian countries, many cross-border pactions in corporate bonds have finally come to an end.

Compared with Japan's International Cooperation Bank, the Asian infrastructure investment bank itself is an intergovernmental Asian regional multilateral development agency, while the BRIC Development Bank is a policy oriented multilateral development bank under the BRICs LED market oriented operation and focused on the development finance business such as infrastructure and sustainable development.

Therefore, bonds issued under their name also have the characteristics of quasi sovereign debt.

Because of this, we can predict that the issuance of bonds on the platform of the Asian infrastructure investment bank and the BRICs development bank can effectively promote the development and experience of the Asian bond market, and at the same time, it will also win time for the construction and integration of the Asian bond market infrastructure.

Finally, the construction of "one belt and one road" needs huge amount of financing, relatively low risk and high credit rating, which is conducive not only to a good start for the development of the Asian bond market, but also to effectively expand the market scale, expand the market investor base, enhance the depth and liquidity of the market, and improve the pricing efficiency of the market and attract investors from outside the region.