Demystifying China’s Stock Market (eBook)

Preface 5
Contents 12
About the Authors 13
List of Figures 15
List of Tables 18
Chapter 1: Demystifying China’s Stock Market: The Hidden Logic Behind the Puzzles 19
1.1 The Puzzles 20
1.2 The Phoenix Market 21
1.3 A Financial System Dominated by the Government 23
1.4 A Speculative Market 24
1.5 The Political Economy of an Incomplete Market 26
References 27
Chapter 2: What Does History Tell Us? The Roots of China’s Modern Stock Market 29
2.1 Introduction 30
2.2 Corporations, Shareholding, and Early Financial Markets in Imperial China 31
2.2.1 First Corporations and Shareholding Enterprises 31
2.2.2 Early Financial Markets 35
2.3 Phoenix-like Markets 36
2.3.1 Stock Market 36
2.3.2 Bond Market 37
2.4 The Rebirth of the Phoenix 38
2.5 Lessons from China’s Historical Experience 41
2.5.1 Government Involvement 41
2.5.2 Speculative Market Crashes 43
2.6 Summary and Conclusions 46
References 47
Chapter 3: A Government-Dominated Financial System 50
3.1 Introduction 51
3.2 The Conundrum: How to Fit the Genie of the Stock Market Inside the Bottle of the Socialist Market Economy? 52
3.3 Chinese-Style Privatization 55
3.3.1 Multidimensional Ownership Reform 55
3.3.2 Motivations for Stock Market Creation 59
3.3.3 Reform of State-Owned Banks 61
3.4 Stock Market Development 64
3.4.1 Institutional Evolution and Regulation 64
3.4.2 Investors 67
3.4.3 Intermediaries and Infrastructure 69
3.4.4 Multi-layered Market 71
3.4.5 Split-share Reform 73
3.4.6 Opening Up 74
3.5 Summary and Conclusions 76
References 76
Chapter 4: A Chinese Style Speculative Market 80
4.1 Introduction 81
4.2 Speculation 82
4.2.1 What Attracts Investors to the Market? 82
4.2.2 Bubbles 85
4.3 Seasonality 92
4.4 An Alphabet Soup of Premia 96
4.4.1 From Trade to Financial Openness 97
4.4.2 A and B Markets 97
4.4.3 A and H Markets and Capital Controls 100
4.5 Summary and Conclusions 105
References 106
Chapter 5: The Political Economy of an Incomplete Market 110
5.1 Introduction 111
5.2 Corporate Governance Chinese Style 112
5.2.1 Enforcement 114
5.2.2 Concentration of Ownership 117
5.2.3 IPO Quota System 121
5.3 Multiple Principals and Price Informativeness 122
5.4 Deconcentrated Multiple Principals of Listed SOEs 127
5.5 Summary and Conclusions 131
References 133
Index 137