China: Developing an Advanced Financial System

By September 7, 2007Trade

Interesting stories pop up when you search for “bond” and “infrastructure.” Like Reuters writing about China modernizing its corporate investment and financial systems:

SHANGHAI (Reuters) – China’s plans to develop a corporate bond market are moving closer to fruition, but a lack of infrastructure and an obsession with high-flying equities mean it could be years before the market builds critical mass.

Corporate bonds are expected to take off eventually, however, as Chinese companies seek financing beyond stock offerings, which dilute earnings per share, and bank loans.

Investors, especially insurers and pension funds, are also looking for options in addition to stocks, property, government bonds and low-yielding deposits.

The stock market has quintupled in value since early 2006? Ay.

Regulation and governance are, of course, serious issues as China develops more advanced financial systems, but these developments are surely positive. Private enterprise, WTO accession, less speculative forms of investment …the trends suggest China will cut fewer and fewer corners as its competes on the world stage.

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