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The Impact of Stock Markets on China's Economic Development: Some Preliminary Assessments

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Abstract

The role that stock markets should be afforded in economic development policy in China is the subject of debate. Some argue that they are essential to reforming state-owned enterprises (SOE's) and overcoming deficiencies in China's credit markets. However, others claim they are not necessary institutions for achieving high levels of economic development and are more likely to be destabilizing. This paper seeks to shed light on the impact that stock markets have had on China's economic development to date. Available data suggests that listing SOE's has been important in terms of raising funds for their reform. However, the corporate governance impact has been ineffectual and stock markets were also an insignificant source of funding for non-state owned firms. Finally, on a macro-level, their impact on the overall level of savings mobilization and the allocative efficiency of capital has been negligible. The policy conclusions are that, firstly, the state should begin trading the shares that it controls, and secondly, non-state owned firms should also be allowed to list.

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  • Dr James Laurenceson, 2002. "The Impact of Stock Markets on China's Economic Development: Some Preliminary Assessments," Discussion Papers Series 302, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:302
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    File URL: http://espace.library.uq.edu.au/eserv/UQ:11061/DP302Jan02.pdf
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    References listed on IDEAS

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    1. Atje, Raymond & Jovanovic, Boyan, 1993. "Stock markets and development," European Economic Review, Elsevier, vol. 37(2-3), pages 632-640, April.
    2. Arestis, Philip & Demetriades, Panicos O, 1997. "Financial Development and Economic Growth: Assessing the Evidence," Economic Journal, Royal Economic Society, vol. 107(442), pages 783-799, May.
    3. Catherine Bonser-Neal & Kathryn L Dewenter, 1999. "Does Financial Market Development Stimulate Savings? Evidence From Emerging Stock Markets," Contemporary Economic Policy, Western Economic Association International, vol. 17(3), pages 370-380, July.
    4. Jefferson, Gary H. & Rawski, Thomas G. & Zheng, Yuxin, 1996. "Chinese Industrial Productivity: Trends, Measurement Issues, and Recent Developments," Journal of Comparative Economics, Elsevier, vol. 23(2), pages 146-180, October.
    5. Harris, Richard D. F., 1997. "Stock markets and development: A re-assessment," European Economic Review, Elsevier, vol. 41(1), pages 139-146, January.
    6. Demirguc-Kunt, Ash & Levine, Ross, 1996. "Stock Markets, Corporate Finance, and Economic Growth: An Overview," World Bank Economic Review, World Bank Group, vol. 10(2), pages 223-239, May.
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    Cited by:

    1. Zheng Song & Kjetil Storesletten & Fabrizio Zilibotti, 2011. "Growing Like China," American Economic Review, American Economic Association, vol. 101(1), pages 196-233, February.
    2. Fan, Xuejun & Jacobs, Jan & Lensink, Robert, 2005. "Chicken or egg: financial development and economic growth in China, 1992-2004," CCSO Working Papers 200509, University of Groningen, CCSO Centre for Economic Research.
    3. Enrico Geretto & Rubens Pauluzzo, 2012. "Stock Exchange Markets in China: Structure and Main Problems," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 19(1), pages 89-106, September.

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