1. The capital market refers to the financial market for securities financing and medium- and long-term fund lending for more than one year, including the stock market, bond market, fund market and medium- and long-term credit market. The funds provided are mainly used to expand reproduction. The use of capital is therefore called the capital market. As an important part of the capital market, the securities market has a huge ability to absorb medium and long-term funds through the issuance of stocks and bonds. Publicly issued stocks and bonds can also be freely bought, sold and circulated in the secondary market, and have strong flexibility.

Capital Market Overview

The capital market is a long-term capital market. It refers to a place for securities financing, capital lending and securities trading that operates for more than one year, also known as the medium and long-term capital market.

The capital market can be divided into the bank's medium and long-term credit market and the securities market according to different methods of financing funds.

If classified according to the basic nature of financial instruments, the capital market can be divided into equity market and bond market. The former refers to the stock market and the latter refers to the bond market. The main certificate circulating in the stock market is the company's stock. Unless the company closes its business, shareholders who hold the stock only have annual dividend income as their equity assets and cannot have immediate claims on the company's assets. The basic characteristics of various debt instruments circulating in the creditor's rights market, including various bonds, commercial promissory notes, certificates of deposit, and loans, are that they have a certain term, a relatively certain rate of return, and the right to claim the full amount.

The capital market is a part of the financial market, which includes all institutions and transactions related to the supply and demand for long-term capital. Long-term capital includes part of the company's ownership such as stocks, long-term public bonds, long-term corporate bonds, large negotiable certificates of deposit for more than one year, real estate mortgage loans and financial derivatives, etc. It also includes long-term loan forms such as collective investment funds, but does not include Commodity futures.

The capital market is a form of market, rather than a physical location. It refers to all the people, institutions and the relationships between them that trade in this market.

Capital market insights are defined differently in terms of their details. Some financial scientists only regard transactions between certified objects as the content of the capital market, and separate loan transactions without certification into the loan market. Other financiers view both as capital markets. It is recognized that long-term capital is the difference between this market and other financial markets such as derivatives markets and currency markets.

Capital market participants:

By investing their capital in a grantee, the investor acquires a contractually proven right to receive capital in the future. Both parties also agree on an interest rate to be paid to investors. Normally interest is paid annually. The level of interest rates is mainly determined by the payment ability of the investor and the level of interest rates in the capital market.

In the capital market, the investor is the demander of capital and the provider of future payment rights.

Market activities in the capital market include the buying and selling of stocks and bonds, joint stock companies raising their capital, and loans to natural persons.

Capital market types

The contract period for capital transfer in the capital market is generally more than one year. This is the difference between the capital market and the short-term money market and derivatives market.

The capital market can be divided into primary market and secondary market:

In the primary market, new capital-absorbing securities are issued and demanded by investors.

Issued securities change hands in the secondary market.

If a market meets the requirements of a stock exchange, it is an organized capital market. Generally speaking, organized markets such as time and location can improve market liquidity and reduce transaction costs, thereby improving the effectiveness of the capital market.

The capital market can be divided into the bank's medium and long-term credit market and the securities market according to different ways of financing funds.

(1) Bank medium- and long-term credit market

It is a place where international banks provide medium- and long-term credit funds, providing financial facilities for governments and enterprises in need of medium- and long-term funds. Most of the demanders in this market are governments and industrial and commercial enterprises. Generally, those with one to five years are called medium-term loans, and those with more than five years are called long-term loans. Funding interest rates are determined by factors such as the economic situation, fund supply and demand, inflation and financial policies. They are generally based on the London Interbank Offered Rate plus a certain margin. The loan methods in this market include bilateral loans and multilateral loans.

(2) Securities market

It refers to the place where securities are issued and circulated. The purpose of issuing securities is to raise long-term capital and is a method of long-term capital borrowing. The securities market is an important part of the financial market.

1. The formation and development of the securities market

2. The structure of the securities market

(1) If examined from the perspective of securities trading, it can be divided into primary securities market and secondary securities market.

(2) If we look at the types of securities traded, the securities market can be divided into bond market and stock market.

3. Types of securities in the securities market

(1) Government bonds: medium-term bonds and long-term bonds issued by the government. These bonds can be traded on the market at any time, but cannot be redeemed until maturity.

(2) Corporate bonds: debt certificates issued by enterprises that promise to repay principal and interest to investors within a certain period of time.

(3) Company stock: a written certificate issued by a joint-stock company to raise capital, proving that shareholders have rights and obligations based on the shares they hold. It is used by stock holders to obtain dividends and bonuses, and based on Securities that provide for the exercise of shareholder rights. It is generally divided into two types: ordinary shares and preferred shares.

(3) Characteristics of the development of contemporary international capital markets

1. The scale of the international capital market is expanding rapidly;

2. Capital market financing and securitization;

3. International financial innovation and off-balance sheet business are growing rapidly;

4. The capital market has increasingly become a place for "competition" between various financial forces, and the stock market is turbulent;

5. The "failure" of the capital market is becoming increasingly prominent in developing countries;

The significance of the capital market to the national economy:

In the national economy, the capital market plays the role of transforming financial capital into century capital. . Its significance is:

1. Accept financial capital (investment) that is not used for consumption;

2. Reach the market between providers and demanders by establishing market prices Balance;

3. Guide capital to the most effective investment;

4. Through competition among capital demanders, capital can be invested in the most effective use, This can improve the wealth of the entire national economy.

The tasks of the money market in the national economy:

1. Term conversion:

The term requirements between the investee and the investor are obtained through term conversion coordination.

2. Batch conversion:

The capital market can pool the money of many small investors into a large investment.

3. Risk conversion:

Future unguaranteed income can be converted into current guaranteed income.

The second currency market is a short-term capital market, which refers to a financial market with a financing term of less than one year. It is an important part of the financial market. Since the financial instruments accommodated in this market are mainly short-term credit instruments issued by the government, banks and industrial and commercial enterprises, which have the characteristics of short maturity, strong liquidity and low risk, they are placed above cash currency and deposits in the hierarchy of money supply. After currency, it is called "quasi-currency", so the market is called "currency market".

Purchase in the money market

An efficient money market should be a market with breadth, depth and flexibility, with large market capacity, rapid information flow and low transaction costs. Trading is active and continuous, attracting many investors and speculators to participate. The money market consists of four sub-markets: the interbank lending market, the bill discount market, the negotiable large-amount certificate of deposit market and the short-term securities market.

The functions of the money market

In terms of its structure, the money market includes the interbank lending market, the bill discount market, the short-term government bond market, the securities repurchase market, etc. The initial driving force for the emergence and development of the money market is to maintain the liquidity of funds. It connects fund demanders and fund suppliers with the help of various short-term financing tools, which not only meets the short-term funding needs of fund demanders, but also provides funds The remaining temporarily idle funds provide opportunities for profit.

But this is only the superficial function of the money market. When the money market is placed in the context of the financial market and even the market economy, we can find that the function of the money market is far more than this. The money market not only provides flexible management methods for banks and enterprises from a micro perspective, making them more convenient and flexible in unified management of the safety, liquidity, and profitability of funds, but also provides a platform for the central bank to implement monetary policies to regulate the macro economy. Provide means to play a huge role in ensuring the development of financial markets.

1. Short-term financing function

Various economic actors under market economy conditions are objectively divided into those with surplus funds and those with insufficient funds, which can be divided into one from the period perspective. There are two major categories: long-term fund surplus and shortage of more than 10 years and short-term fund surplus and shortage of less than one year. Compared with the capital market (Capital Market), which provides services for the supply and demand of medium and long-term funds, the money market (Money Market) serves seasonal, The financing of temporary funds provides a feasible way.

Compared with long-term investment capital needs, short-term and temporary capital needs are the most basic and most frequent capital needs of microeconomic actors, because short-term temporary and seasonal capital shortages It is caused by the frequency of daily economic activities. It is inevitable and frequent. If this fund gap cannot be filled, even simple reproduction of society cannot be maintained, or it will only keep the commodity economy at a primary level and short-term funds will not be available. The financing function is a basic function of the money market.

The management function of the money market:

The management function of the money market mainly refers to promoting microeconomic actors to strengthen their own management and improve operating levels and profitability through the development of their business activities. .

(1) The inter-bank lending market and securities repurchase market are conducive to the improvement of commercial banking business operations and the realization of profit maximization goals

Inter-bank lending and securities repurchase are commercial Banks are the main channel for financing short-term funds in the money market. A fully developed interbank lending market and securities repurchase market can adjust the surplus and deficit of commercial bank reserves in a timely and appropriate manner, so that commercial banks do not need to maintain a large amount of excess reserves to cope with withdrawals or redemptions, thus making various available reserves available. It can be said to be "killing two birds with one stone" by making full use of high-yield assets. To this end, commercial banks must use scientific methods to manage capital liquidity, which brings commercial banks' asset and liability management to a new level.

(2) The bill market is conducive to profit-oriented enterprises to strengthen business management and improve their own credit levels

The bill market can be divided into a bill issuance market and a bill acceptance market in terms of bill behavior. The market and bill discount market can be divided into ordinary corporate bills and bank bills based on the issuing entities. Only entities with good reputation and good operating performance are qualified to issue bills and be recognized and accepted by society in all aspects of issuance, acceptance, and discount. There are obvious differences in the rights and obligations of bills issued and accepted by entities with different credit ratings. , such as the interest rate, the liquidity of the bill, the amount of mortgage or pledge, etc. Therefore, companies trying to obtain short-term funding sources from the bill market must be companies with good reputations, and only companies with scientific management and excellent returns meet such conditions.

Policy transmission function:

The money market has the function of transmitting monetary policy. As we all know, the central bank of a market economy country implements monetary policy mainly through the use of rediscount policies, statutory deposit reserve policies, open market operations, etc. to influence market interest rates and adjust money supply to achieve macroeconomic control objectives. In this process The Chinese currency market has played a fundamental role.

(1) The interbank lending market is an important channel for transmitting the central bank’s monetary policy

The central bank transmits monetary policy through the interbank lending market with the help of interbank lending rates and excess reserves of commercial banks. The influence of gold. First of all, the interbank offered rate is one of the interest rates in the market interest rate system that is most sensitive and directly reflects the central bank's monetary policy, and has become a "signal light" for changes in the central bank's monetary policy. This is because, in developed financial markets, interbank lending activities involve a wide range, large transaction volumes, and frequent transactions, and the interbank lending rate has become the basic interest rate for determining other market interest rates. Internationally, the method of determining interest rates by adding or subtracting the agreed range on the basis of the interbank offered rate has been formed. In particular, the London interbank offered rate has become an internationally accepted basic interest rate. Through the operation of monetary policy tools, the central bank first affects the interbank interest rate, and then affects the entire market interest rate system, thereby achieving the purpose of regulating the money supply and regulating the macro economy. Secondly, in terms of excess reserves, a developed interbank lending market will encourage commercial banks to maintain excess reserves at a stable level, which obviously creates good conditions for the central bank to control the money supply.

(2) The bill market provides the central bank with a carrier and channel for macro-control.

The traditional concept is that the bill market is limited to clearing, and even the short-term financing function is often ignored. In fact, in addition to the above two basic functions, the bill market also provides an important vehicle for the central bank to implement monetary policy.

First, the rediscount policy must be implemented in the bill market. Generally speaking, if the central bank raises the rediscount rate, it will shrink the bill market, and conversely, it will expand the bill market.

At the same time, the central bank adjusts the rediscount rate in a timely manner through feedback from the bill market information, and achieves the ultimate goal of monetary policy through changes in the intermediary goals of monetary policy.

In addition, with the continuous improvement and development of the bill market, the stability of the bill market continues to increase, and a market price that is in equilibrium and can freely change with market rules will be formed and acceptable to both supply and demand. , reflected in the capital price is the market interest rate, which is undoubtedly an important reference for the central bank's interest rate policy.

Secondly, a variety of bills are one of the tools used by the central bank to conduct open market operations. The central bank can flexibly adjust the money supply by buying or selling bills to inject or withdraw currency. achieve the ultimate goal of monetary policy.

(3) Treasury bills and other short-term bonds are the central bank’s main tools for open market operations

Open market operations have obvious advantages over deposit reserve policies and rediscount policies. It puts the central bank in an active position, its scale can be large or small according to macroeconomic needs, transaction methods and steps can be arranged at will, and it will not have a big impact on the money supply. At the same time, the concealment of its operations will not change people's psychological expectations, so it is easy to achieve the desired effect.

However, conducting open market operations requires the central bank to have a considerable scale and a wide range of securities, of which Chinese bonds, especially short-term treasury bonds, are the main species. Because treasury bonds have excellent credit and strong liquidity, they adapt to the needs of open market business operations. At the same time, open market business operations mainly affect changes in the money supply in the short term. Therefore, there are more requirements for short-term bonds and bills. Therefore, Treasury bills with various maturities that are generally accepted have become the main tool for the central bank to conduct open market operations.

The function of promoting the development of the capital market, especially the securities market

As the core components of the financial market, the money market and the capital market are the material basis for the standardized operation and development of the latter.

First of all, a developed money market provides a stable and abundant source of funds for the capital market. From the perspective of capital supply, the level of funds provided by the surplus party ranges from short-term to long-term, from temporary to investment. Therefore, the money market has built a "fund pool" between fund suppliers and the capital market. The capital market Participants' essential short-term funds can be met from the money market, and funds withdrawn from the capital market can also find a way out in the money market. Therefore, the money market and the capital market are like a pair of "twin brothers" and neither side can be favored.

Secondly, the healthy development of the money market reduces the impact on society caused by changes in capital supply and demand. The funds withdrawn from the long-term market have a way out, the impact of short-term hot money on the market has been greatly reduced, and speculative activities have been suppressed to the greatest extent possible. Therefore, only when the money market develops and improves can the funds in the financial market be reasonably allocated. From the development process of financial markets in most developed countries in the world, it can be concluded that "money market first, then capital market" is the key to the development of financial markets. Basic rules.

It can be seen from the above analysis that the money market plays an important role in the healthy development of financial markets and market economies, and is the basic link for the normal operation of micro entities and macroeconomics. However, there are prerequisites for the normal functioning of the money market. The development and perfection of the currency market itself is the primary prerequisite for its functions to be exerted.

For example, a developed interbank lending market requires a wide range of participants, frequent and extensive transactions, and market prices that follow the market; a developed bill market requires that the subject of bill behavior must be a real market with good credit. For economic actors, bill behavior is legal and standardized; the formation of the treasury bill market requires that the treasury bills issued by the government reach a certain scale and have reasonable terms and grades. The existence of these conditions provides a good carrier for the function of the money market.

Secondly, the development of money market functions, especially policy functions, requires the development of other financial market sub-markets. In the performance of this function, the money market is actually the first to reflect the changes in the central bank's monetary policy and further affects the long-term financial market, that is, the capital market, and then affects a wider range of markets. This is because, under the conditions of market economy, changes in economic behavior caused by changes in interest relationships basically rely on money as a carrier. In this process, the money market and the capital market serve as the "second transmitter" and "third transmitter" respectively. hand" function. A developed market economy is the third condition for the functioning of the money market. The financial market itself is a product of the market economy.

In the market economy, the government carries out macro-management of the market and micro-economic actors through indirect regulation, and the micro-agents become true "economic people" and "rational people". In order to maximize profits and satisfy Operation and consumption are carried out to maximize utility. The relationship between supply and demand has become the basic factor in price changes, and price has become the basic signal for changes in resource allocation. A developed market economy itself not only requires a money market, but also provides a good external environment for the development of the money market.

Therefore, it can be easily concluded that the money market is the prerequisite for the healthy development of the financial market and market economy, and the improvement of the financial market and market economy provides conditions for the normal development of the money market. The three are A complementary unity. In this relationship, the money market plays a fundamental role. Emphasizing the capital market and neglecting the money market has weakened the basic role of the money market, causing market economic actors to lose the support of the short-term financing market. At the same time, it has destroyed the coordinated development of the money market and the capital market, resulting in a large number of money markets Market funds flow to the capital market. On the one hand, the currency market is shrinking due to lack of funds. On the other hand, the expanding capital market has accumulated too much short-term hot money, and the bubble component of the capital market has become increasingly obvious.

Secondly, due to the extension of the above results, the link through which the central bank regulates the macroeconomy has been severed, which has greatly weakened the effect of the central bank's monetary policy. Getting to the bottom of things and fully understanding the basic functions and roles of the money market in the entire financial market and the market economy have practical and long-term profound significance for the improvement of the socialist market economy and the normal development of the financial market.