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Chen Gangming: Continuously Optimizing Fundamental Service and Pushing Forward Opening up of Bond Market

 

The year 2018 marked the 40th anniversary of China’s reform and opening up, and it also witnessed important innovations and changes in bond market. Under the leadership and with the support of the authorities, in response to the new-era requirements for financial sector, China Central Depository & Clearing Co., Ltd. (CCDC) has been implementing the national strategic deployments, promoting service capacity building, and conducting a series of tasks to maintain the market stability and push forward the reform and development of financial infrastructure.

First, based on financial infrastructure mandates, to focus on servicing real economy. CCDC has concentrated on its core business and deepened the understanding and construction of life-cycle bond service system. It won the title of “Best Bond Market Organization Servicing Real Economy” in 2018. During the year, CCDC supported bond issuance of more than 13 trillion yuan, with bond under its depository around 58 trillion yuan. It now manages collateral assets of 14 trillion yuan, and has settled 1,300 trillion yuan for the whole year. In the field of bond issuance, CCDC supported the public underwriting and collective issuance of local government bonds, the tender issuance of CDB bonds, the DVP settlement of issuance payment; it supported OTC operation of local government bonds and the issuance of savings bonds; it continued its efforts in enterprise bond pre-issuance assessment, and supported pilot issuance program for high-quality enterprises including some private enterprises. In the field of depository and settlement, CCDC has launched self-reconciliation services, promoted three-party repurchase business, expanded the use of collateral, and established a default resolution mechanism. In the field of pricing products, CCDC released high-yield bond indices to meet the diversified valuation needs. The ChinaBond yield curves were posted on the websites of the CBIRC and the National Debt Association. The company also leverages the synergy of CCDC Group (with three offices in Beijing, Shanghai and Shenzhen) to continuously improve the diversified financial service platform. It has promoted the circulation of credit assets to help banks revitalize the asset stock; it enhanced wealth-management products supervision services, initiated wealth-management product investor information registration, and explored third-party depository of wealth-management products; and it also consolidated the registration of trust products.

The second is to safeguard market operations and prevent and control financial risks. The company gathered its resources to push forward key infrastructure projects, promoted comprehensive risk management, and laid a solid foundation for preventing financial risks and building a stable lifeline for the bond market. The new-generation system construction has made some milestone progress. The system reflects the frontier and integrity natures of the infrastructures, focuses on the life-cycle planning and control, establishes a new-generation technology framework, embodies standardization and data governance, and improves the business continuity. The new data centers were being built in an orderly manner. In accordance with the principle of macro-strategy planning and high-standard construction, CCDC has completed the overall planning and design of the new-generation data centers in Beijing and Shanghai. With the goal of safety and efficiency, CCDC aims to construct a new multi-centered, integrated operation and maintenance system. CCDC also promoted the construction of risk monitoring system. The statistic monitoring index system and early warning system were strengthened. Four monitoring indicators were engineered and nearly 700 statistic monitoring and analysis reports were provided for the whole year. The use of ChinaBond pricing indices and collateral services in risk management area were probed to provide useful tools for identifying, measuring, evaluating, and preventing market risks.

The third is to promote interoperability and push forward bond market reform and opening up. In accordance with national deployment, the company actively promotes interconnection and internationalization strategy. In terms of interconnection, it supports cross-market transactions of more than 1 trillion yuan for major bond categories such as government bonds and corporate bonds; it promotes cross-category collateral cooperation, conducts research on inter-bank cross-system bond lending, and supports cross-market bond ETF innovations. In terms of capacity building, CCDC actively advocates the Chinese bond market abroad and has launched the English on-line training system; it continued to conduct international researches and established the “CCDC-SUFE International Institute for Bond Studies”; it created an international exchange platform and is exploring the establishment of an overseas representative office. At present, it supports overseas institutions to hold more than 1.5 trillion yuan of domestic bonds. CCDC not only provides a direct market entry mode with direct holding and settlement agent, but also supports the “Bond Connect” access mode, both with DVP mechanism. In terms of internationalization, CCDC actively participates in financial assessments of international organizations, and integrates infrastructure into bilateral and multilateral financial cooperation mechanisms; it explores cross-border interconnection of bond markets; it conducts cross-border collateral cooperation, promotes cross-border mutual recognition, and provides collateral support for domestic-guaranteed overseas loans and external loans by Ministry of Finance; it launched overseas investment indices for global investors and released ChinaBond Green Bond Indices at overseas exchanges.

 

We remains true to our original aspiration and keeps our mission firmly in mind. We actively takes on the responsibility of the country's core financial infrastructure. We will continue to optimize fundamental services, build a safety line of defense, provide a strong support for prudent and effective supervision, provide quality services for institutional business innovation, provide support for market opening up, and continuously promote new development in financial infrastructure. In the year 2019, we will make all efforts in the following areas.

First, to better serve the market. We will consolidate the core functions and deepen the customer-demand-oriented response mechanism. We will strive to complete the new-generation integrated system and the new data centers to promote the modernization of financial infrastructure. The company will support the implementation of policy of enhancing direct financing by improving ABS, green bonds and high-quality corporate bond services. CCDC will further implement three-party repurchase, speed up the introduction of central bond lending mechanism, and improve the risk management mechanism. The ChinaBond magazine and brand activities of CCDC will have bigger roles as market platforms.

Second, to secure some breakthroughs in supporting supervision. We will continue to answer to the requirements of the CPC Central Committee for Comprehensively Deepening Reform by further improving the price fluctuation monitoring mechanism for the Treasury bond market. We will promote the construction of the monitoring indicator system for the bond market by introducing the repo benchmark rate index, the monetary market liquidity discrepancy index, the bond market stability index and the financial condition index. We will strengthen the registration of financial assets, improve the market monitoring and analysis framework, and consolidate the basis of regulatory support. We will improve the function of professional think tanks and provide timely data analysis and policy advices.

Third, to better service the implementation of macroeconomic policy. We will continue to provide support to government bonds, Treasury cash management, and open market operations. Based on these efforts, we will deepen the support of the strategic measurement system for Treasury bond and strengthen local government bond management services; deepen the support for innovative financing tools such as TMLF and perpetual bonds; strengthen financing services for high-quality enterprises of various ownership types; optimize government industrial funds registration and evaluation services; and deepen the support of collateral management in the field of international financial cooperation.

Fourth, to better facilitate financial reform and opening up. CCDC is the forerunner of financial interconnection and interoperability. It is the hub connecting multi-level financial markets. Under the policy support, the company will continue to promote unified, secure and efficient interconnections of bond markets. We will promote innovative business such as cross-sector use of collateral, cross-system bond lending and cross-market bond ETFs. In line with the trend of interest rate liberalization and the cross-border use of RMB assets, ChinaBond Pricing Index System will be further expanded. Under the guidance of related policies, we will promote the design of cross-border interconnection schemes and continue to optimize the opening up services of the bond market.

Dear friends, the reform and development process of China's bond market has brought us together. I hope that this forum will serve as a link and platform for all parties in sharing common concerns, inspiring in-depth discussions and promoting joint constructions. Let us, under the leadership of the regulatory authorities, jointly push the development of the Chinese bond market to a new stage!

 

2019.01.17
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