Central Bank Official: Five Problems Hindering Securities Market Development

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Last updated at: (Beijing Time) Wednesday, June 12, 2002

Central Bank Official: Five Problems Hindering Securities Market Development

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China's securities market has a great potential for further development, but five problems are hindering market development, said Dai Genyou, director of monetary policy department of People's Bank of China, the central bank.

He pointed out that major problem perplexing securities market is the singularity of transactors. Take inter-bank transaction for example, although China has 700 transactors, they are mainly financial institutions, non-financial institutions still can not conduct deals.

In foreign countries, commercial banks shall not become major investors of securities market, but China's situation is just the other way round.

Secondly, there are only two kinds of securities in market currently: treasury bonds (T bond) and policy-related financial securities, most of them are long-term one, short-term one is in shortage.

In addition, settlement, liquidation problems in inter-banks also exist.

Securities circulating frequency is low, and certificate bond is not allowed yet.

He stressed that interest rates of long-term fixed securities continue to drop in recent two years, posing a certain risk for banks. Due to lack of short-term treasure bond, investors tend to take the long-term T bond as short-term one for transaction.

If the inflation rate is higher than 2%, the peg rate T bond of commercial banks will suffer losses.

By PD Online Staff Li Yan

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