Caixin
Dec 25, 2020 04:31 AM
FINANCE

Central Bank Vows to Toughen Law Enforcement in Bond Market

What’s new: China’s central bank pledged to deepen reforms in the country’s bond market and strengthen law enforcement as the $15 trillion market faces a rising wave of defaults.

Top regulators from the People’s Bank of China, the top banking and securities regulators, and the Supreme Court met this week to discuss the legal framework of China’s bond market and pledged to improve disclosure, unify market standards, and boost law enforcement.

Caixin has learned that regulators are working to unify market standards and rules applied to all bond issuers, in the latest effort to close the gaps in the highly fragmented market. Supervisory responsibilities in China’s bond market are shared by the central bank, the China Securities Regulatory Commission, and the National Development and Reform Commission, among others.

Why it matters: Improving the legal regime and stricter law enforcement in the bond market were highlighted for the first time at China’s annual Central Economic Work Conference this year, a key event concluded last week to map out the country’s economic policy priorities for the coming year.

China, home to the world’s second-largest bond market, has been rocked by scandal and a wave of defaults this year among privately owned companies and state-owned enterprises, most recently involving Yongcheng Coal and Electricity Holding Group Co. Ltd. The string of repayment failures has spooked investors and sent prices tumbling.

Pan Gongsheng, vice governor of the central bank, said at the recent meeting that regulators will work with academic and business circles to improve the legal framework for the bond market and enhance market oversight.

Related: Cover Story: How SOE Default Wave Shows State Bailouts Are Over

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Han Wei (weihan@caixin.com)

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