At first, the formation of the People#x2019;s Republic of China resulted in a halt of capital market activities. The remaining stock markets in Beijing and Tianjin stopped operations in 1952 and national government bond issues were discontinued after 1958.304 This part of the financial system was considered a capitalistic element305 and could re-emerge only gradually during the 1980s in a rather unregulated environment. The first bond was issued in 1981 and the two stock markets were established in 1990 in Shanghai and 1991 in Shenzhen. To date, these are the only officially approved domestic stock exchanges. The sole reason for this development was that the capital required for economic development could not be mobilised through other channels by the government to a degree deemed satisfactory. This constituted a tremendous step for China, but the Chinese capital market was still far from a form that would measure up to international standards in terms of market composition and performance at the time. For one, the capital market development had to be aligned with the prevailing political ideology, which often afforded flexibility in various ways.306 Similarly, capital market instruments had to be extended and advanced in steps from the ground up, while adhering to the particular Chinese political and economic context. To give an example, shares and bonds were rather similar in the 1980s in that shares frequently had been provided with a guaranteed return as well as a guaranteed repurchase after an agreed time, whereas dividends — if provided at all — were commonly not dependent on annual profit or loss.307 Nonetheless, the capital market has evolved over the years, with promising, shaky, and troublesome phases. Additionally, the capital market has played a role in generating a sense of professionalism in financial services that is now very different from the phase prior to the start of the reforms at the end of the 1970s.308
Stock Market Initial Public Offering Bond Market Gross Regional Product China Security Regulatory Commission
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