TrendsWide
Contact US
  • Home
  • Trending
  • Health
  • Life Style
  • NBA
  • Reviews
No Result
View All Result
TrendsWide
  • Home
  • Trending
  • Health
  • Life Style
  • NBA
  • Reviews
No Result
View All Result
TrendsWide
No Result
View All Result
Home Economie

China’s bond market needs significant reforms, says IMF

by souhaib
September 29, 2020
in Economie
0
74
SHARES
1.2k
VIEWS
Share on FacebookShare on Twitter
ADVERTISEMENT


You might also like

‘momentum is continuing into 2022’

Astra Space stock closed down 20% on Monday: here’s why

Ripple, Dogecoin, Litecoin price forecast for February 2022

  • Investors onshore are counting on Beijing for a significant liquidity injection and other essential reforms.
  • Liquidity withdrawals globally and other factors have contributed to China’s bond market selloff.
  • IMF believes foreign investors don’t have enough derivative tools to hedge against risks.

China’s rapidly growing $15tn mainland bond market is one of the markets with top prospects for pension funds and other institutional investors. Still, trading risk, low liquidity, a thicket of legal trouble, and a shallow market are some of the significant issues the Chinese government debt market needs to address.

There have been many regulatory restrictions in the Chinese bond market, allowing domestic, commercial banks to hold bonds to maturity. That lowers liquidity in the secondary market; thus, leading to high trading costs.


Are you looking for fast-news, hot-tips and market analysis?

Sign-up for the Invezz newsletter, today.

The International Monetary Fund has advised that China’s bond market needs significant reforms to be a suitable place for foreign investors.

William Xin, head of fixed income at Eastspring China, the Asian asset manager, said:

“Apart from government bonds and bank policy bonds, liquidity in other segments of the market remains poor. However, this will improve with time as the market grows in terms of breadth and depth.”

Calls for reforms face resistances

The Chinese government bond issues a wide range of crucial tenors, unlike the US Treasury bonds, which focus on specific maturities such as ten and thirty-year bonds to help price discovery in the US fixed income markets and enhance liquidity.

China bonds lack liquidity, and it’s vulnerability to adverse shocks is higher because turnover solely depends on if the Chinese Central Bank is easing or tightening monetary policies.

China’s bond market is much lower than the international markets, but it is expected to increase, but it’s still unclear how far it will go. But government support for an implausibly low default rate will raise more questions about how determined Beijing will avoid implicit guarantees and whether credit risks will be priced correctly.

Bond ratings are a big issue as most bond ratings outside China take a more realistic view of potential defaults. Local credit rating agencies rate China’s government bonds and most corporate bonds as AA or AAA, which aren’t really as most Chinese bonds pay for positive ratings themselves. Nevertheless, the IMF says,

“China’s rating industry needs to rebuild credibility.”

Another resistance among foreign investors is if they can exit the bond market without any restriction, said the IMF.

More roadblocks with tax

Tax further complicates matters. The Chinese government declared a 3-year exemption from withholding tax and value-added tax (VAT) on interest earned from onshore bonds by foreign investors in 2018.

But investors still don’t know the fixed income the tax exemption covers. Tax regulations have proved inscrutable; thus, resulting in uncertainty in calculating tax bills among foreign investors. Investors still don’t know if the tax exemption will be extended.

Nevertheless, none of these difficulties have thrown foreign investors, investment banks, and even asset managers from promoting China’s bond market. But China needs to reform its bond market to become trustworthy.



Source link

Share this:

  • Twitter
  • Facebook
  • More
  • Pinterest
  • Telegram
  • Email
Share30Tweet19
Previous Post

Pinterest Automation Marketing Tool, Schedule Pins, Auto Unfollow, Pinterest Marketing

Next Post

Patek Philippe Complications Automatic World Time Gold Men’s Watch 5230R-012

souhaib

Recommended For You

‘momentum is continuing into 2022’

by souhaib
February 7, 2022
0

Shares of Chegg Inc (NYSE: CHGG) are up 10% in extended trading on Monday after the student services company said it performed better-than-expected in Q4, despite COVID-19 uncertainty....

Read more

Astra Space stock closed down 20% on Monday: here’s why

by souhaib
February 7, 2022
0

Read more

Ripple, Dogecoin, Litecoin price forecast for February 2022

by souhaib
February 7, 2022
0

The cryptocurrency market is advancing this Monday, and this situation also supports the price of Ripple XRP/USD, Dogecoin DOGE/USD, and Litecoin LTC/USD. Bitcoin is trading above the $44,000...

Read more

Analyst: ‘Apple would be forced into it if Amazon goes after Peloton’

by souhaib
February 7, 2022
0

Read more

Should I buy Uber shares in February 2022?

by souhaib
February 7, 2022
0

Uber Technologies, Inc. (NYSE: UBER) will announce fourth-quarter earnings results this Wednesday, February 09, after the market closes. Uber shares have weakened more than 10% since the beginning...

Read more
Next Post

Patek Philippe Complications Automatic World Time Gold Men's Watch 5230R-012

No Result
View All Result

Recent Posts

  • Scott Pruitt, Trump’s Disgraced Former EPA Chief, Gets Crushed In Senate Primary
  • The plan to overturn abortion rights in Europe – POLITICO
  • Putin’s economy is starting to show cracks, and Russian public opinion could soon follow
  • Shopify Improvement Providers: The New Craze!
  • Travis Barker was ‘hospitalized for pancreatitis’ after undergoing colonoscopy

Browse by Category

  • Australia
  • Automotive
  • Business
  • Celebrity
  • Cryptocurrency
  • Deals
  • Economie
  • Education
  • Euro
  • Forex
  • Gaming
  • Health
  • Life Style
  • NBA
  • News
  • Reviews
  • Sports
  • Switzerland
  • Trending
  • U.S.
  • Uncategorized

Categories

  • Australia
  • Automotive
  • Business
  • Celebrity
  • Cryptocurrency
  • Deals
  • Economie
  • Education
  • Euro
  • Forex
  • Gaming
  • Health
  • Life Style
  • NBA
  • News
  • Reviews
  • Sports
  • Switzerland
  • Trending
  • U.S.
  • Uncategorized

Pages

  • Contact US
  • Newsletter
  • Privacy Policy
  • Terms & Conditions

© 2021 - TrendsWide

No Result
View All Result
  • Home
  • Contact US
  • Privacy Policy
  • Trending
  • U.S.
  • Economie
  • Deals
  • Reviews
  • Cryptocurrency
  • Health
  • Life Style
  • NBA

© 2021 - TrendsWide