Challenges from WTO Membership
- Advances in Chinese Economic Studies series
Edited by Kam C. Chan, Hung-Gay Fung and Qingfeng ‘Wilson’ Liu
4. The small- and medium-enterprise stock market Hung-gay Fung and Qingfeng ‘Wilson’ Liu INTRODUCTION Before 1978, China’s economy had been controlled by a central-planning system in which all enterprises were either state-owned or collectivelyowned, with all aspects of operations directly administered by the government. The ﬁnancing of these enterprises was managed by the government through the state-owned banking system, which granted loans in accordance with policy priorities.1 Since the late leader Deng Xiaoping began the economic reforms in 1978, many small and medium-sized private enterprises (SMEs) have emerged. An example was the large number of countryside textile workshops that sprang up in the coastal provinces of Jiangsu and Zhejiang. For these private businesses, it was diﬃcult to obtain a loan from the state-owned banking system, limiting their business development potential. Out of the large number of private businesses, only a small proportion were able to grow into mature enterprises and achieve economies of scale. The stock market was formally established in the early 1990s with the opening of the Shanghai on 19 December, 1990 and Shenzhen Stock Exchanges on 3 July, 1991. Chinese companies that were able to get listed on exchanges and sought ﬁnancing by issuing stocks were mostly stateowned or partially privatized state-owned enterprises. The strict listing requirements and quota restrictions made it impossible for many private businesses to raise funds through stock exchanges, especially for those cashthirsty new high-tech ﬁrms. With the advent of the information age in the mid- to late-1990s, many high-tech ﬁrms emerged....
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