The Development of Chinese Bond Market and Its Critical Issues for Essay

The Development of Chinese Bond Market and Its Critical Issues for Future Development - Essay Example sts have argued that the bond market, whose role in the economic development is as great as that played by equity market has for a while remained obscure, as the general public seems to have little of it. Currently, few private investors are taking part in the bond market as compared to those in the stock market (Wu, 2014, p. 484). Worth noting, bond market plays a critical role in the economic development of a country, with the cash flow it provides playing a vital role in promoting the maturity of the individual investors assets and liabilities, and in the long run helping in the management of risks. As such, this paper will provide a detailed discussion of the development of the Chinese bond market, and provides an insight into the critical issues for future development. China began issuing treasury bonds in 1981 when it was first allowed to trade over numerous counters leading to the development of the secondary market for RMB Bond. The establishment of the Chinese stock exchange market in the 1990s led to the centralized trade of the Treasury bond. This piece of work analyzes the development of Chinese Bond market, which due to the absence of the centralized Securities Depository and not limited to inappropriate infrastructure has been hit by serious strikes. China is putting efforts to build a safe and cost effective bond market, which has led it to a healthy growth to emerge as one of the biggest financial markets in China (Zhu and Martha, 2009, p. 56). The bond market plays a significant role in the determination and setting of the fiscal policy and the monetary policy in China to sustain the financial revolution. In an effort to build a safe, low cost and efficient bond market, the establishment of the China Government securities Depository Trust and clearing company was a big boost (Guizot, Armelle 2012, p. 64). The CDCC (China Depository and Clearing Company) was the custodian of any marketable RMB bond and also began the development of open market