Chapter 2: Birth Pangs of a Market: Creation and Development of China’s Cross-Border Share Markets
I INTRODUCTION The listing on domestic stock exchanges of Chinese State Owned Enterprises (SOEs) emerged in the 1980s as part of the central government’s combined aims of getting the state out of enterprise operations and promoting the marketization of the economy. The water was ﬁrst tested by the central treasury, which began issuing treasury bonds in 1981. It was not long before many central and locally-controlled state-owned enterprises (SOEs) began issuing ﬁnancial and construction bonds to provide badly needed funds for the country’s economic reconstruction. Both the China International Investment Corporation and the Bank of China ﬂoated public bonds in the early 1980s,1 and local bonds were ﬂoated in major municipalities like Fujian, Guangdong and Xiamen. Legal and economic reform initiatives in China are often tried out ﬁrst at the regional/local level before being adapted for nationwide implementation. The growth of securities markets provides a good example of this. Markets for the sale of enterprise equities and bonds originally developed in pockets throughout the country, and were regulated through a series of rules promulgated by provincial and municipal governments. Thus, the ﬁrst Chinese companies to issue domestic shares (‘A-shares’) did so under regional government encouragement and control. The Joint Investment Co in the Baoan County of Shenzhen issued the ﬁrst public share certiﬁcates in 1983 under provincial Shenzhen regulations. In November 1984, the Shanghai Feiyue Hi-ﬁ Corp ﬂoated 10 000 shares at Rmb 50 a share, and two months later the Tan Yanzhong Realty Co issued 100 000...
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