The Shanghai Stock Exchange has scrapped trading fees for bond transactions to encourage bond dealing.

Investors are now exempt from trading fees for spot bond transactions and bond repurchase agreement transactions until November 30, 2009, the bourse said in a statement on its Website yesterday. The exemption covers all treasury bonds, corporate bonds and convertible bonds.

"The move aims to promote the development of the bond market and encourage investors to deal in bond trading more actively," the statement said.

The top 50 spot bond or bond repurchase traders over the next year will be exempt from trading fees for the following year, starting from December 1, 2009, according the bourse statement.

The bourse said it would continue to adjust trading fees according to the development of the bond market.

Qi Bin, director general of the research center of the China Securities Regulatory Commission, said in an earlier report that the country should ultimately have a bond market that is similar in size to its stock market. This would help investors hedge risks between the two markets.

China's bond market is less than a third of the size of its stock market, Qi said.

On Monday, China allowed the resumption of medium-term notes for non-financial companies, to offer an alternative funding source against the backdrop of a global financial meltdown.

A medium-term note is a bond that usually matures in five to 10 years. It is traded in China's inter-bank market.

(Shanghai Daily October 9, 2008)