Bond Market

Abstract

The national interbank bond market founded by the PBC in June 1997 is a key and characteristic component of the current bond market of China. Therefore, thorough understanding of China’s bond market cannot be acquired without observation of the whole institutional change process of China’s bond market. We may make a case study of the establishment of China’s interbank bond market to discuss the topic. This requires answers to several questions: first, why was China’s bond market first built upon the exchange market; second, what caused the institutional change from the former exchange-based market to the interbank market, and why did the central bank promote an over-the-counter (OTC) bond market; and third, what drives the rapid and steady development of China’s interbank bond market? So to speak, China’s bond market, in its set-up and development, becomes a genuine embodiment of the characteristics of China’s market-oriented reforms. In particular, China’s interbank bond market turns into a successful case of a government-built market, which is rare in the history of China’s economic restructuring. It is worth analyzing its differences from the institutional innovation and reforms in other economic fields and exploring what have made it successful. However, to understand the limitation of such a development pattern is also required.