Challenges from WTO Membership
Advances in Chinese Economic Studies series
Edited by Kam C. Chan, Hung-Gay Fung and Qingfeng ‘Wilson’ Liu
China’s economy has been growing rapidly over the last two and a half decades and is expected to maintain this momentum in the foreseeable future. Because of the huge foreign direct investments and domestic entrepreneurships, China’s economic growth has been largely fueled by the expansion of the industrial sector, which has helped China earn the nickname ‘Workshop of the World’ and represented more than half of its GDP.1 This economic structure, however, is in sharp contrast with those of developed economies, in which the service sector invariably constitutes an overwhelming share. Because China has the biggest population in the world with ongoing urbanization trends, there is tremendous growth potential for China’s underdeveloped service sector, especially the capital markets and ﬁnancial services industry, which are pivotal in meeting the ever-increasing ﬁnancing needs of the manufacturing sectors to ensure the continued development of the economy. As a member of the World Trade Organization, China’s accession promises to open up the ﬁnancial sector to foreign competition by the end of 2006. Thus, China aﬀords endless lucrative opportunities to domestic as well as international institutional and individual investors. Nevertheless, there also exist tremendous risks and challenges. They include the changing nature of the ﬁnancial markets, inadequate and fastchanging regulations and laws, excessive governmental inﬂuence, the lack of transparency in accounting and corporate governance, and all the other problems associated with the transition economy with ﬁnancial market liberalization. A handbook on China’s capital market that systematically documents and analyses its current and future...