In this article you will find information about debt consolidation refinance, debt financing, Debt management foundation

Debt consolidation refinance

This policy move offers a number of other distinct advantages, three of which are highlighted here.

  First, this scheme could consolidate fragmented, illiquid, non-tradable, and captive public-sector liabilities into a homogeneous and larger CGB market. This would enhance bond market liquidity, as market size and liquidity tend to be positively and highly corre- lated. A bigger market would in turn enhance the CGBs as an attractive global asset class for international investors, by accommodating more domestic and foreign players and better absorbing shocks arising from potential volatile cross-border capital movements in the con- text of a more open capital account.

The net effect on the budding offshore CGB market, however, is ambiguous, as a much more liquid and sizable onshore CGB market could imply a less viable offshore cusin in the long term.

Debt financing

Second, a large, integrated, and liquid CGB market permits more regular bench- mark issues of good size, which facilitates a more efficient and reliable benchmark yield curve and support the development of a nascent CGB futures market. This in turn facilitates the development of broader Chinese credit and derivatives markets.

Debt management foundation

 Third, this proposed public-sector liability consolidation scheme also helps lessen the implicit tax burden of high reserve requirements on Chinese commercial banks (Ma, et al 2013; McCauley and Ma, 2015). The Chinese RRR remains very high by international standards, even after a hypothetical reduction to 9 percent. Therefore, a meaningful reduction of reserve requirements not only funds benchmark treasury issues traded publically, but also helps cushion the net interest margins of commercial banks in the wake of interest rate de- regulation, lessening resistance to financial liberalization.