Q&A on Recent Risk Events in the Bond Market

Today, an official of the Shanghai Stock Exchange (SSE) in charge of relevant businesses answered questions from the press on a small number of risk events found recently in the bond market and the role of the bond market in supporting the real economy.

Q: Recently, the cases of default on a small number of bonds have drawn widespread attention in the bond market. What measures does the SSE take to deal with the bond risks?

A: Since the beginning of this year, the default risks on the SSE’s bond market have generally shown a trend of shrinking, as the number of new defaulters is decreasing, the bond default rate remains at a low level, and the bond risks are controllable on the whole. However, due to the changes in the macroeconomic situation at home and abroad and the impact of the COVID-19 pandemic, some industries and companies have seen their operating pressure increase, and a small number of companies have defaulted on bonds, which has caused widespread concern in the market. Under the leadership of the China Securities Regulatory Commission (CSRC), the SSE has attached great importance to the management of risks in the bond market by implementing the decisions and arrangements of the CPC Central Committee and the State Council and strictly defending the bottom line of avoiding systemic risks.

Going forward, the SSE will further strengthen management of risks for corporate bonds and step up the efforts in dealing with defaults. First of all, we will intensify self-regulation. Adhering to "zero tolerance" for major violations, the SSE will adopt regulatory measures and take action in a serious manner according to laws and rules, so as to effectively maintain market order and protect the legitimate rights and interests of investors. Secondly, we will tighten risk monitoring and checking. The SSE will implement the mechanism for monitoring risks of corporate bonds, and intensify the checks for risks on the small number of companies with potential risks in related industries and regions, so as to discover, give early warning and push for resolving and handling the situation in a timely manner. Thirdly, we will strive to form regulatory synergy. The SSE will enhance information sharing, improve cross-market regulatory coordination, and urge the issuers and intermediaries to fulfill their responsibilities of risk management and resolve the risks.

Q: In recent years, the corporate bond market has achieved steady development. How will the SSE give further play to the role of the corporate bonds in serving the real economy?

A: Corporate bonds are an important means for the capital market to serve the real economy and play an important role in increasing the proportion of direct financing and reducing costs for social financing. This year, implementing the requirement for the registration-based issuance system for corporate bonds, the SSE has adopted a number of measures in countering the impact of the epidemic and serving the real economy. From January to October this year, non-financial companies issued corporate bonds worth RMB2.45 trillion on the SSE, which have bolstered the resumption of work and production and the development of the real economy.

Going forward, the SSE will, under the leadership of the CSRC, implement various arrangements for deepening the reform of the capital market, continue to improve the issuance and trading systems for corporate bonds, enhance information disclosure, support all kinds of eligible companies in issuing corporate bonds, guide investors in strengthening market analysis, research and judgment as well as rational investment, tighten the responsibilities of issuers and intermediaries, and protect the legitimate rights and interests of investors, so as to build a high-quality corporate bond market and better serve the real economy.