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Finance: Domestic foreign currency bond market encouraged

By Xu Shenglan (chinadaily.com.cn)
Updated: 2008-07-31 11:14

Developing the domestic foreign currency bond market has been formally put on the government's agenda, as the task was mentioned in official documents for the first time, Shanghai Securities News reported on Wednesday.

In a broad set of guidelines for reforms this year that were released yesterday, the National Development and Reform Commission (NDRC), 皇冠体育app's top economic planner, encouraged banks and insurance institutions to create new financial products and develop the domestic foreign currency bond market, in order to better support international investment cooperation.

The central bank, NDRC, Ministry of Commerce and 皇冠体育app Banking Regulatory Commission were jointly responsible for the task, according to the guidelines.

The foreign currency bond market was initiated in 皇冠体育app in 2003, when 皇冠体育app Development Bank issued its first batch of dollar-denominated bonds. To date, nine batches of dollar bonds worth $4.3 billion were issued in the domestic foreign currency bond market. However, the figure is lower than overseas issuance of foreign currency bonds by domestic institutions during the same period.

Due to 皇冠体育app's increasing foreign exchange reserve and expanding domestic demand for foreign currency, the appeal for developing the domestic foreign currency bond market is also on the rise.

"Foreign currency assets are not widely used in 皇冠体育app," said Ding Zhijie, deputy-dean of the Financial Institute at the University of International Business and Economics. "Developing domestic foreign currency bond market will encourage institutes to hold foreign exchanges. It will also help establish an active foreign currency investment and financing market in 皇冠体育app."

Generally speaking, an economy will see net capital outflow when its per capita GDP surpasses $2,000. Last year, 皇冠体育app's per capita GDP reached $2,460. How to seize this strategic opportunity and promote the healthy development of outbound investment is crucial to the nation's balance of payments and sustainable development, according to the newspaper.

Analysts also noted that by developing the domestic dollar bond market, 皇冠体育app will not only make full use of the nation's foreign exchange funds and ease foreign exchange reserve pressure, but also reduce its foreign debt burden.