allocation of issue quota usually followed a principle of helping the poor. enterprises in difficulties or poorly managed were more likely to get quota. 3. the absence of a bond rating system made it impossible for investors to get a clear idea of risks. 4. information was not disclosed to the investors. on the one hand, accounting standards in china were not up to the international standards. neither accounting practice by the enterprises nor external audit was proper and provided little information. one the other hand, information disclosure was not emphasized. thorough analysis of the disclosed information was part of the decision making process. 5. price was set administratively and price ceiling was controlled. such pricing did not factor in risks and made effective risk management by issuers and buyers impossible. 6. administrative rules required bank guarantee for enterprise bond issue. this is closely related to the problems mentioned just now. since bond issue quota was administratively allocated and price controlled, and neither information disclosure nor credit rating was available, bank guarantee seemed to be the natural solution. however, once guaranteed by a bank, the product was no longer a standard enterprise debt. 7. bond was issued to individual investors, whereas the international practice is to institutional investors with analyzing capability, i. e. qualified institutional investors. individual investors usually do not have sufficient market analysis ability or risk bearing capability. 8. effective constraint by market was not established. market mechanism can constrain the issue and transaction of corporate bond because investors form a judgment on and choose from products. that is, it is up to the market to determine what enterprise debts fare well and what don ’ t, prices of products and consequences of default. if the market does not exercise effective constraint, we will have to use administrative and supervisory means for constraint, ensuing a series of problems. alongside market constraint, a transaction mode should be established for otc to play a dominant role, to enable measuring of counter party risks and flexibilities in price judgment. 9. investor education was not sufficient. to a large extent, many investors at that time treated enterprise bond as a variation of savings product. whenever default occurred, they would bring the problem to government agencies and request redemption from underwriters. 10. a proper bankruptcy law was absent. in case of default, the existing bankruptcy law cannot use bankruptcy as the last resort of deterrence to restrain the enterprise in question. as a result, creditors ’ rights and interests as provided for by the bankruptcy law usually cannot be protected. in case of bankruptcy, at least the

be more aware that china ’ s financial system may face a series of challenges arising from financial globalization and china ’ s wto accession. a great deal of topics are to be studied, giving rise to crucial tasks for scholars in the field of finance. nevertheless, i would like to stress that researchers are also lucky as they are in a transition period and the country is undergoing unprecedented economic and financial reform, where many economic and financial phenomena are hard to be well explained by existing theories and experiences. china ’ s practice has provided researchers with abundant materials and room for innovation in such areas as sequence of financial market development, coordination of the development of money market, capital market and insurance market, the roadmap and institutions associated with the evolution of multi - layer financial markets, in particular capital markets and financial risk management system. moreover, chinese authorities have been conducting monetary policy management, exchange regime reform, rural financial system reform, policy bank reform and related legal system reform under very complicated circumstances. these issues unique to china also provide scholars with sufficient room for research. china ’ s financial researchers have been exposed to the frontier by the great time. this is not only a precious opportunity, but also a great challenge. modern economic and financial theory emerged in the western countries after long - term observation and research by western economists. the theory is subject to relatively strict conditions, which may not be appropriate in china ’ s practice. nevertheless, we believe that china ’ s financial researchers will take a scrupulous attitude and not confine to the existing theories and historical experiences. with these efforts, theoretical development will be brought to a new stage on the basis of china ’ s reform practice, giving rise to financial theory development in the world. passion is needed in the reform, while cool mind is necessary for research. researchers need to be objective, independent and scrupulous with the research work. economic and financial performance involves the interaction of interests of different parties. the objective of financial theoretical research is to objectively describe the patter of interests and the rule of its change, providing guidance to economic and financial policy making aimed at establishing appropriate incentive mechanisms. in this vein, the china financial institute will take measures to further mobilize research resources to conduct pioneering study on important theoretical issues with respect to china ’ s reform and development under the support of financial supervisory agencies, commercial banks, securities firms, insurance companies, publishing houses, schools and financial research institutes. in conclusion, i wish professor huang da continued success in economic and financial