Local government bonds can be divided into local government general bonds (hereinafter referred to as general bonds) and local government special bonds (hereinafter referred to as special bonds) based on the source of the funds. General bonds are bonds issued for non-profit public welfare projects, with the provinces, autonomous regions, municipalities directly under the central government and cities under separate state planning as the issuers and repayers. The interest and principal of general bonds will be paid by general public budget during a certain period. Special bonds are bonds issued for public welfare projects with certain income, with the provinces, autonomous regions, municipalities directly under the central government and cities under separate state planning as the issuers and repayers. The interest and principal of special bonds will be paid by government funds or special income of these public welfare projects during a certain period.

Financial bonds in the exchange market include policy financial bonds and subordinated debts of insurance companies. Policy financial bonds refer to financial bonds issued by China’s policy banks (National Development Bank, China Agricultural Development Bank and China Exim Bank) to banks and other institutions for the purpose of raising credit funds with the approval of the State Council. The subordinated debts of insurance companies refer to the insurance companies’ approved collection. The settlement of principal and interest of the subordinated debts is after the insurance company’s policy liability and other liabilities but before the insurance company’s equity capital.

Enterprise bonds are securities issued by enterprises as per legal procedures of Regulations on the Administration of Enterprise Bonds and agreeing to pay off the principal and interest in a specified time. The National Development and Reform Commission, as the authority in charge of enterprise bonds, is responsible for the enterprise bonds’ issuing approvals.

Corporate bonds refer to securities which are issued by a company in accordance with legal procedures and agreed to repay the principal and interest within a certain period.

Convertible corporate bonds are a kind of corporate bonds which can be converted into a predetermined amount of the underlying company’s equity at certain times. Convertible bonds can be seen as a combination of “bonds + stock options”.

An asset-backed security (ABS) refers to a financing instrument that is used by enterprises or other financing entities to sell their assets or portfolio of assets (basic assets) that are legally vested, lacking liquidity but with predictable steady cash flow to a Special Purpose Vehicle (SPV).

A bond repurchase refers to a situation that a bondholder pledges its bonds for financing; and the parties agree to return the principal, pay back the repurchase interests, and release the bonds pledged after the repurchase period expires. The party selling the bonds for financing is the repurchase party, and its counterparty is the reverse repurchase party.