China may be launching an exciting new plan for the finance market – junk-bonds. The China Securities Regulatory Commission (CSRC) has been in meetings with executives from the various brokerage houses and discussed having a market for high-yield bonds.
Zhou Ruanfan, a senior vice president from the Pengyuan Credit Rating Co. Ltd. Was quoted by the China Business News as saying that CSRC has already drafted rules for the bonds. These bonds would offer higher yields and more risk than the typical investment-grade corporate bonds that are already offered.
Those in the know agree that a high-yield bond market will help to support China’s economic growth by offering financing to smaller firms, as Yin Jianfegn explained. As Yin said,
"Rating agencies will gain, underwriters will gain, companies will gain, and investors may gain as well.”
However, Yin warned that the junk-bond market won’t transform the financial market overnight. As Yin said, "It would be unrealistic to expect the junk-bond market to make a fundamental change in China's bond market structure.”