콘텐츠 바로가기
로그인
컨텐츠

Category Open

Resources

tutorial

Collection of research papers and materials on development issues

home

Resources
Economy Financial Policy

Print

Study on Korea's corporate bond market and its implications on China's bond market development (English)

Related Document
Frame of Image
  • Study on Korea's corporate bond market and its implications on China's bond market development (English)
  • World Bank (WB)


link
Title Study on Korea's corporate bond market and its implications on China's bond market development (English)
Similar Titles
Material Type Reports
Publisher

World Bank (WB)

Date 2004
Language English
File Type Link
Subject Economy < Financial Policy

Abstract

This report reviews the development of the Korean bond market to determine its lessons for China's bond market, which is rapidly expanding. Korea's former regulatory regime and market practices were similar to those currently existing in China. This report points out and explores five key shortcomings of Korea's corporate bond market: heavy government intervention, the prevalence of guarantee bonds, the absence of market monitoring, the over-use of short-term bonds, and an underdeveloped government bond market. It also examines the market restructuring process and highlights some of the measures necessary for developing a more advanced corporate bond market in Korea (specifically, while Korea's corporate bond market has undergone substantial changes since the 1997 financial crisis, Korea should maintain its focus on restructuring efforts, enhancing bondholders' roles, globalization, and diversification). Based on insights gained from examining the Korean corporate bond market, this paper makes recommendations for China's developing market. First, Korea's experience demonstrates the importance of synchronizing infrastructure and investor base development. Preferential development of an investor base without the necessary market infrastructure resulted in serious market dysfunction in Korea. Coordinating these aspects is a crucial step for developing a well-balanced, viable bond market in China. Second, Korean market development shows that credit enhancement schemes, such as asset-backed securities and partial guarantee systems, are vital apparatuses for smooth and sophisticated advancement of the corporate bond market. To make up for the lack of efficient credit enhancement schemes in Korea, guarantee bonds with a poorly developed infrastructure prevailed. Finally, prudential regulations and subsequent supervision should be equally stressed as China's corporate bond market undergoes deregulation and development.