Corporate Governance and China’s H-Share Market
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Corporate Governance and China’s H-Share Market

Alice de Jonge

Using detailed case studies of the first nine mainland Chinese companies to be listed on the Hong Kong stock exchange, this book examines the evolution of corporate governance law and culture in China’s H-share market. A story emerges not of tensions between ideas of corporate governance from two different legal systems – Hong Kong vs mainland Chinese – nor about legal convergence as China adopts concepts from Anglo-American jurisdictions. Rather, it is a story of individual firms being pragmatic in mediating the different agendas of state-agencies that own or control them.
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Chapter 2: Birth Pangs of a Market: Creation and Development of China’s Cross-Border Share Markets

Alice de Jonge


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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