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China¡¯s problems concerning the issuance of treasury bonds Dr. Tangxu        Dr. Tangxu, director of the Graduate School, gave a special lecture to the class of 2002 on the problems of issuing treasury bonds in China on May 22, 2003. The main content is as follows:              First, explain the problems of stock and flow in China¡¯s treasury bonds market on the basis of detailed data and solid analysis;              Second, the economic background of the issuance of treasury bonds:       a. Treasury bonds are issuing at an increasing rate, however, the money supply is growing at a very low rate;       b. At the same time, the speed of economic growth is lowed down;       c. The price is descending and even grows at a negative rate;       d. In the market, the supply is excessive.              Third, the economic limits that should be considered:       a. The value of the to-be-paid treasury bonds was already up to 20.13% of the GDP ( at the end of 2002 );       b. The interest payment amounted to RMB 67.5 billion (2002), which was almost 3% of the government expenditure of that year;       c. The problem of hidden deficits: the deficits of local governments and the losses of the state-owned enterprises;       d. The relationship between inflation and the issuance of treasury bonds.              Fourth, how can treasury bonds stimulate the economy?       a. The effectiveness of government investment;       b. The income of treasury bonds is used in infrastructure construction;       c. The relationship between the income from the environment and the fiscal subsidy;       d. The conditions that must be satisfied to stimulate the economy               Fifth, why treasury bonds are contained in the secondary reserves of commercial banks?               Sixth, money market and capital market are linked by the transactions of treasury bonds;               Seventh, the relationship between the development of insurance industry and the issuance of treasury bonds:       a. The development of China¡¯s insurance industry need the issuance of a certain amount of treasury bonds;       b. The treasury bond is an important instrument for the investment of insurance fund;       c. The treasury bond is an important tool for the allocation of insurance assets.              Eighth, the treasury bond provides tools for implementing monetary policy        a. For the open market operations, it¡¯s a condition that the commercial banks possess a great amount of treasury bonds and that a lot of treasury bonds are traded£»       b. Among the tools of monetary policy, the credit plan has been cancelled, the interest rate hasn¡¯t been real market rate and the adjustment of reserve requirements rate may greatly strike the market;       c. The open market operation is on the way to an important instrument of monetary policy.              Ninth, the role of treasury bonds during the opening-to-the-outside process of RMB:       a. Treasury bonds can help attract foreign capital;       b. If RMB is to be an international currency, the treasury bond market will be a place for the investment of foreign countries¡¯ international reserves;       c. Only when such a place exists, can RMB become an important reserve currency.              Tenth, conclusions:       a. If the issuance of treasury bonds shrinks, the system of commercial banks may face greater crises;       b. If the issuance of treasury bonds shrinks, as China is far from developed, the growth of economy will be lowered;       c. If the issuance of treasury bonds shrinks, the monetary policy may become weak;       d. If the issuance of treasury bonds shrinks, the financial market may get in chaos ;       e. It is the best situation that the value of all the issued treasury bonds takes 5% of that year¡¯s GDP;       f. We can see from the issuance of treasury bonds that the government plays a very important role in the market economy ;       g. However, such a function is realized by means of the market, not compulsory measures;       h. So, in the development of China¡¯s economy, the government can continue playing a positive role in some other fields such as the infrastructure construction, and so on.