Summing Up and Looking Ahead
With the passage of the Securities Law in December 1998 and its effectiveness as of July 1999, the first stage of development of China’s experiment with stocks and stock markets has come to an end. This eight-year period has witnessed an extremely vigorous effort to live up to Deng Xiaoping’s January 1992 admonition to ‘try out’ stocks and securities markets ‘in a determined fashion’. If success of the new is measured by how banal it comes to be seen, then stock markets in China have been very successful. At the turn of the century they have become part of the background noise of everyday Chinese life. Even someone as cautious as Jiang Zemin can state, ‘The shareholding system is a form of capital organization of modern enterprises. It is beneficial for the separation of ownership rights and management authority, it is beneficial for raising the efficiency of an enterprise’s use of capital. Capitalism can use this system, socialism also can use it.’ Such an achievement should by no means be underestimated coming in a country as ideologically extreme as China was only a few short years ago. On the other hand, it is largely due to this previous ideology that China’s stock markets have developed in a manner and a direction significantly different than stock markets in the West. This is not necessarily bad or good, but, markets being markets, no matter where they operate they are prone to distortion. Their heritage being what it is, it is no surprise that China’s markets face the type and extent of challenges which they do. But this is only to be expected of any emerging market. What is unexpected is that they are no longer experimental — China’s equity markets are a reality, having become a vital part of the nation’s economic being.
KeywordsStock Market Security Market Secondary Market Capital Organization Corporatization Process
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