Foreign Firms and the Market for Securities

Abstract

Securities markets are the second largest pillar of the Chinese financial market. Despite the notion that they — as core institutions of a market economy — contradict the socialist nature of China’s economic order, they have gained significance and size over the reform course and have become a symbol of market-oriented reforms. However, equity markets are still burdened with the consequences of incomplete SOE reform and the resulting hybrid market order. Bond markets have remained underdeveloped and largely dominated by government and quasi-government financial bonds. In addition, a distinct feature of the Chinese securities markets had been their closed character, until WTO entry in 2001 brought a breakthrough for the market participation of foreign firms. How have these firms entered the Chinese securities markets since then? Have they become important actors in their development?