China’s Capital Markets

China’s Capital Markets

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 since the late 1970s and is expected to maintain this momentum in the foreseeable future. Coupled with the biggest population in the world, there is tremendous growth potential for China’s capital markets and financial services industry, both vital to the continued development of the economy. The contributors present research on all facets of China’s markets including: stock and bond markets; futures and over-the-counter markets; regulatory issues; and the development and roles of financial institutions such as brokerage firms, banks and insurance companies. Also addressed are the recent performance of equity markets, the emergence of small and medium enterprises, and the state banks’ bids to be listed in overseas stock exchanges. Taken together, the book sheds a welcome light on China’s overall economic growth.

Chapter 1: Chinese Stock Market: Perspectives in Institutional Structure, Regulations and Performance

Kam C. Chan, Hung-gay Fung and Julia S. Kwok

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation

Extract

Kam C. Chan, Hung-gay Fung and Julia S. Kwok INTRODUCTION To facilitate economic reforms and to help state-owned enterprise raising capital, China began its capital market reform in the late 1980s. A big step taken was to launch its two stock exchanges (Shanghai Stock Exchange and Shenzhen Stock Exchange) and allowed state-owned enterprises to have their shares listed on two stock exchanges. Shanghai Stock Exchange was founded on 26 November 1990 and Shenzhen Stock Exchange was officially established later on 1 December 1990. Over 15 years, the Chinese stock markets came a long way. By 2001, the total market capitalization of Chinese stock markets was ranked second in Asia (Jingu 2002, p. 3). There are many events and policy changes throughout the economic reforms. We present some of these major events and changes in Appendix 1.1. These events and policy changes reflect the development of an equity market in China and they offer valuable lessons and policies for China and other emerging markets. While there have been a number of studies on Chinese stock markets in recent years, the discussion of institutional structure and regulations in the Chinese stock market is rather limited. This chapter will shed some lights on China’s institutional structure and regulations. Moreover, the Chinese stock market experienced a downturn beginning in the early 2000s. We also offer some discussions and examine how the Chinese government reacts to the recent poor performance of its stock market. 25 26 Financial markets INSTITUTIONAL STRUCTURE Types...

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