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Assessing China's Top-Down Securities Markets

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  • William T. Allen
  • Han Shen
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    Abstract

    China’s securities markets are unlike those of Amsterdam, London or New York. Those markets evolved over centuries from myriad interactions among those seeking finance on the one hand and savers seeking rewarding investments on the other. Such spontaneous securities markets did emerge throughout China in the 1980s following the start of economic liberalization, but these spontaneous markets were closed by the government in favor of new and tightly controlled exchanges established in the early 1990s in Shanghai and Shenzhen. These new markets, have been designed to and largely limited to, serving state purposes, that is to assist in the financing of the state sector of the economy. Rather than evolving in a bottom-up pattern, they are controlled, top-down securities markets. This essay reviews as of June 2010, the development of these markets, the economic functions they perform, the regulatory structure that controls and shapes them, and the governance mechanisms - legal and otherwise - that controls the management of the PRC listed companies. These markets represent a signal accomplishment of the Chinese leadership in producing in less than twenty years’ modern, albeit not yet fully developed, securities markets. Whether they can be further developed to serve more basic economic role than they have been permitted to play is a question with which the essay concludes.

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    File URL: http://www.nber.org/papers/w16713.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16713.

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    Date of creation: Jan 2011
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    Publication status: published as William T. Allen, Han Shen. "Assessing China's Top-Down Securities Markets," in Joseph P. H. Fan and Randall Morck, editors, "Capitalizing China" University of Chicago Press (2013)
    Handle: RePEc:nbr:nberwo:16713

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    1. Chen, Gongmeng & Firth, Michael & Gao, Daniel N. & Rui, Oliver M., 2005. "Is China's securities regulatory agency a toothless tiger? Evidence from enforcement actions," Journal of Accounting and Public Policy, Elsevier, vol. 24(6), pages 451-488.
    2. Sonia M. L. Wong & Sonja Opper & Ruyin Hu, 2004. "Shareholding structure, depoliticization and firm performance," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 29-66, 03.
    3. Robert W. Fogel, 2006. "Why China is Likely to Achieve its Growth Objectives," NBER Working Papers 12122, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Pessarossi, Pierre & Weill, Laurent, 2013. "Choice of corporate debt in China: The role of state ownership," China Economic Review, Elsevier, vol. 26(C), pages 1-16.
    2. Glick, Reuven & Hutchison, Michael, 2013. "China's financial linkages with Asia and the global financial crisis," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 186-206.

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