The Political Economy of an Incomplete Market

  • Eric Girardin
  • Zhenya Liu


The apparent convergence of the legal framework to international standards may hide major specificities of China’s stock market. In spite of the official progress made in creating rules and regulations, the practice of corporate governance is hampered because they are not properly enforced. The multiplicity of principals at work in the pre- and post-initial public offering process reflects core features of the organization of China’s state-owned enterprise sector and institutional apparatus. We will analyze these features using a political economy perspective.

The incompleteness of the Chinese stock market is the natural product of government dominance. The Chinese government did not intend to build a complete stock market providing signals for an efficient allocation of capital. The government has always intended to use the stock market as an economic instrument, and to try to keep everything under control. The government does not want the market to provide signals for the allocation of capital because it feels able to provide better signals than those provided by the market. The stock market in China is a politico-economic instrument, not a standard market.


Political economy Incomplete market Corporate governance Multiple principals Deconcentration 


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Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Eric Girardin
    • 1
  • Zhenya Liu
    • 1
    • 2
  1. 1.Aix-Marseille UniversityMarseilleFrance
  2. 2.Renmin University of ChinaBeijingChina

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