Abstract: This paper investigated the determinants of credit spread in Chinese corporate bond market based on the theory of credit spread decomposition. According to the rating information, we show that expected default accounts for a really small fraction of the after-tax spread in corporate rates over treasuries. Meanwhile, we find that the term structure of risk-free rate，the liquidity risk premium and the PMI index have strong explanatory powers. A further study shows that the remaining portion of the credit spread is closely related to the factors that we commonly accept as explaining risk premiums for common stocks. We think this is an interesting topic deserving more further studies.