日韩精品久久一区二区三区_亚洲色图p_亚洲综合在线最大成人_国产中出在线观看_日韩免费_亚洲综合在线一区

Global EditionASIA 中文雙語Fran?ais
Business
Home / Business / Finance

Precautions can help prevent bond bubble from building

By Zhang Ming | CHINA DAILY | Updated: 2020-06-22 10:11
Share
Share - WeChat
A clerk counts cash at a bank in Nantong, South China's Jiangsu province. [Photo/Sipa]

Although the COVID-19-related global financial turbulence has caused fluctuations in Chinese markets, it has also offered a rare development opportunity for China's bond market.

Since late February when COVID-19 accelerated to spread worldwide, global financial markets have fallen into an unprecedented turmoil. Liquidity crisis broke out as different categories of financial assets all slid away in mid-March. Central banks of developed economies have resorted to extremely loose monetary policy to alleviate the crisis.

Accompanying the global financial turmoil is the looming concern of global recession, against which major developed economies have an increasingly narrower space in conventional policies.

The government debt-to-GDP ratio is expected to rapidly rise this year from a relatively high base in the United States, Japan, Germany, France, and the United Kingdom. On the monetary front, the yield of 10-year treasuries in the US and UK is between 0 and 1 percent and could further drop later.

Yet, there is a silver lining for China's bond market amid this clouded global financial and economic landscape, especially for risk-free and low-risk bonds. Both demand for and supply of those bonds are expected to rise, while the participation from foreign investors should increase.

First, Chinese debt assets may become more appealing for investors as China's relative robustness in growth may sustain a high interest rate level by global standards.

Output of the Chinese economy registered a sharp contraction of 6.8 percent on a yearly basis in the first quarter of the year, but the economy has gradually recovered. I expect China's year-on-year GDP growth to rebound to 2 percent in the second quarter, 6 percent in the third, and 7 percent in the fourth. Whole-year economic growth may surpass 2 percent.

The world economy is expected to contract by 3 percent based on the International Monetary Fund's forecast in April. The differential between the economic growth of China and that of the world could therefore expand to 5 percent this year, versus 3.2 percent last year. In 2019, China's economy grew by 6.1 percent, while the global economy expanded by 2.9 percent.

This relative economic stability could make Chinese financial assets more attractive, especially in the second quarter when China's economy embarks on recovery while overseas economic activity remains subdued.

In China's money and bond markets, interest rates are expected to maintain well in positive territory with limited downward room. The China 10-year treasury is yielding over 2.8 percent, versus about 0.85 percent of the equivalent US treasury. Such a yield spread of about 2 percentage points can make China's treasury bonds appealing worldwide.

Second, the expansion in government bond issuance, which is aimed at ironing the COVID-19 economic shock, will boost high-quality supply in China's bond market.

This will help the market to satisfy institutional investors' need for holding more high-quality assets to weather the sustained financial market turbulence.

The annual session of the national legislature has approved the issuance of special treasuries worth 1 trillion yuan ($141 billion) this year. Meanwhile, this year's quota of special local government bonds was raised to 3.75 trillion yuan, up by 1.6 trillion yuan from last year. Policy and commercial banks are also expected to issue considerably more bonds this year.

Third, as Chinese bonds become more attractive while financial market opening-up deepens, a larger scale of foreign capital is expected to be allocated for Chinese bond assets this year.

Indeed, emerging market economies encountered a record short-term capital outflow amid the financial turmoil over the first quarter of the year. But the markets will gradually stabilize, with investors turning their focus from solely seeking safe havens to keeping a balance between hedging risk and pursuing return.

By then, China's relatively high risk-free interest rate is expected to draw considerably more global capital into its bond assets, via channels like the Qualified Foreign Institutional Investors program and the Bond Connect.

Fourth, investors' relatively high risk aversion will underpin the demand for the low-risk tranches of debt assets.

Investors in the Chinese market have been grappling with multiple uncertainties this year, both from external and domestic factors.

Externally, it remains to be seen whether the risk of imported COVID-19 cases will be well contained through the pandemic and to what extent the global recession will weigh on China's exports, let alone the uncertainty surrounding the China-US economic and trade frictions.

The risk of bankruptcy, meanwhile, still threatens domestic small and medium-sized enterprises in the hard-hit consumption and export sectors. If the risk materializes on a large scale, the laborers who may be laid off could further strain the job market, which already feels the pressure from a record-high number of graduates. Also, the plunge in economic growth could complicate the task of preventing and resolving major financial risks.

These lingering uncertainties have determined that investors' risk-aversion should remain at a relatively high level through the year, buoying demand for low-risk bonds.

It is worth noting that while high-grade bonds may be snapped up, low-grade corporate bonds could face severe default risks.

With economic fundamentals and the external environment worsening, Chinese businesses are facing strong head winds. Particularly, the industries hit heavily by the pandemic, the vulnerable small and medium-sized enterprises, as well as the financing platforms and real estate developers facing cash flow pressure, may all become much more prone to default and even bankruptcy.

Therefore, it can be argued that the divergence in market performance of high-grade and low-grade credit bonds will deepen this year. The nation should take adequate precautions against the default risks.

The writer is director of the Department of International Investment of the Institute of World Economics and Politics, which functions under the aegis of the Chinese Academy of Social Sciences.

Top
BACK TO THE TOP
English
Copyright 1995 - . All rights reserved. The content (including but not limited to text, photo, multimedia information, etc) published in this site belongs to China Daily Information Co (CDIC). Without written authorization from CDIC, such content shall not be republished or used in any form. Note: Browsers with 1024*768 or higher resolution are suggested for this site.
License for publishing multimedia online 0108263

Registration Number: 130349
FOLLOW US
CLOSE
 
主站蜘蛛池模板: 成人毛片免费视频播放 | 免费一级大毛片a一观看不卡 | 欧美影院入口 | 草草国产成人免费视频 | 午夜影院在线观看版 | 香蕉18xxoo欧美夜视频 | 久久se精品一区精品二区 | 成人欧美在线观看 | 国产成人精品.一二区 | jizzjizz日本人 | 欧美大片欧美大片 | 亚洲精品国产综合一线久久 | 91精品观看91久久久久久 | 在线观看a视频 | 免费观看呢日本天堂视频 | 欧美一区| 欧美精品在线一区 | 亚洲高清在线视频 | 欧美三级视频 | 国产精品久久久99 | 91极品在线 | 91手机在线观看 | 亚洲日韩欧洲无码av夜夜摸 | 婷婷色婷婷 | 亚洲精品久久AV无码蜜桃 | 亚洲 欧美 日韩在线 | 久久99深爱久久99精品 | 亚洲福利网 | 国产视频高清在线 | 亚洲欧美一区二区三区在线 | 久久精品无码一区二区日韩av | 碰碰免费视频 | 91精品国产综合久久久密闭 | 国产一区二区久久精品 | 亚洲午夜成激人情在线影院 | 天天操很很操 | 精品伊人久久 | 国产精品久久久久久久久久免费 | 国产精品婷婷久久久久 | 欧美成人一区在线 | 午夜精品久久久久久久男人的天堂 |