(Yicai Global) March 11 -- The head of one of China's commercial lenders has suggested the addition of bond provisions to the country's securities law, as well as the enactment of an internet finance law.

"I suggest facilitating integrated supervision in the bond market by making regulatory and information disclosure rules and setting up a bond market default recovery mechanism," Wang Tianyu, president of the Henan-based Bank of Zhengzhou, said at the annual meetings of the National People's Congress and the  People's Political Consultative Conference, the country's top political advisory body.

China's corporate bond financing volume has risen as have defaults, Wang noted. The lag in the establishment of legal mechanisms in the Chinese bond market has resulted in loopholes in issuance rules, information disclosure, the protection of investors' rights, debt recovery and integrated supervision, he added. These make it difficult to recover some corporate bonds and trace those responsible.

The proportion of corporate bond financing in private financing increased to 14.9 percent last year from 1.5 percent in 2003. The percentage is far higher than the proportion of non-financial firms' domestic equity financing. Corporate bond financing volume rose by CNY2.5 trillion to hit CNY20.1 trillion (USD3 trillion) last year, having risen by CNY49.9 billion (USD7.4 billion) in 2003.

The bond market, however, has witnessed a stream of defaults affected by the slowdown in economic growth and the credit crunch in the financial market. Defaults occurred in 242 bonds from 105 issuers since the first such instance in the open market in 2014 to the middle of January this year involving a bond principle of CNY194.6 billion.

Internet-based finance has played an active role in promoting the development of inclusive finance, Wang said, adding that the sector faces problems and risks stemming from its rapid development without legal regulation. Thus, laws and regulations are necessary related to internet finance to improve long-term supervision in the field, he stated.

Editor: William Clegg