Transcript Financial Development in China Lecture Four: Capital

Part Two: China Capital Market
---- Overview and Prospects
International Lecture
March 2015
Xingmin Yin
School of Economics, Fudan University
220 Handan Road, Shanghai 200433
Email: [email protected]
1
Contents
Ⅰ. Introduction
Basic Views
Evolution of Capital Market
Equity Structure
Fluctuation of Stock Market: Booming or
Bubble in 2007
Ⅵ. Function Assessment of China’s Stock Market
Ⅶ. The Proposed Reform Measures for Stock
Market
Questions and Problems
Ⅱ.
Ⅲ.
Ⅳ.
Ⅴ.
2
Ⅰ. Introduction
 With China’s full liberalization of markets in
2007 due to its membership in the World Trade
Organization (WTO), interest in China as an
investment market is increasing all over the
world.
 Portfolio managers have long been interesting
in China as part of their diversification strategy.
Many are hopeful that as China evolves into a
more developed and managed economy, the
financial markets will develop further and
become more transparent.
3
 With more developed financial markets, the
amount of money and information flowing in
and out of China will increase as foreign
investor accessibility increases. This process
will encourage continual growth and evaluation
of the Chinese financial markets by both
domestic and foreign investors and should
decrease the amount of market segmentation
between foreign and domestic investors.
 It is necessary to understand the operation of
China’s capital markets.
4
Ⅱ. Basic Views
 What is your impression on China’s
capital markets?
 Is it possible to make huge money
overnight in stock market?
 If everybody will make their daily
maintenance, or get huge money in one
or two months through the stock market,
what will be happened in this market?
5
Valuing Stock in Chinese Stock Markets
 The price of a share of stock is the present
value of expected future cash flows, which
consist of dividends plus a final selling price.
 Investors are willing to pay a price for stock
that reflects the sum of all of the future cash
flows the securities will generate, after
adjusting for the time value of money.
 The problem is predicting the future cash flows
of the firm.
 The theory of efficient markets suggests that
stocks will always be correctly priced. But it is
not in China.
6
Ⅲ. Evolution of Capital Market
 The preparation for capital markets(19781990)
 The emergence of stock exchange
markets (Shanghai and Shenzhen) and
their operation features (1991-1996)
 The policy adjustments for stock markets
and market development (1997-July 2014)
 New Features of Chinese capital markets
in 2014/2015.
7
Basic Concepts with Chinese
Characteristics
 A shares are available to domestic holders.
 B shares are available exclusively to foreign
investors and certain authorized domestic
securities firms.
 H shares refer to stocks of mainland China
established companies traded directly in Hong
Kong Stock Exchange (HKSE).
 N shares: a small group of Chinese firms are
listed on the New York Stock Exchange (NYSE).
 More ? shares such as L shares (London) , and
F shares (Frankfurt) are possible……
8
 The number of listing Chinese companies in
abroad is more than 200 up to end-2013.
 182 of these firms listed in HKSE
 4 of these listed in HKSE and London
 10 of these listed in HKSE and New York
 1 of these listed in HKSE, London and New
York
 2 of these listed in Singapore and New York.
9
Market Segmentation
 Although B, H and N shares are all intended
to attract foreign funds, as H and N shares
are issued and traded outside mainland China
and therefore must comply with the
additional legal disclosures set by the trading
markets.
 the co-existence of different classes of shares
creates more sophisticated features of
market segmentation in Chinese market.
10
Securities Exchange
 An organized exchange has a building
where securities trade.
 Exchange rules govern trading to ensure
the efficient and legal operation of the
exchange, and the exchange’s board
constantly reviews these rules to ensure
that they result in competitive trading.
 Discussion on trading rules.
11
 The two organized stock exchanges in
China are Shanghai Stock Exchange and
Shenzhen Stock Exchange.
 Shanghai Stock Exchange occupies a
building in Pudon downtown, and only
traders who are members of the
exchange may engage in trading. To
become a member, securities firm must
buy a “seat”.
 Trading practice.
12
Stock Market Indexes
 A stock market index is used to monitor the
behavior of a group of stocks. By reviewing the
average behavior of a group of stocks,
investors are able to gain some insight as to
how a broad group of stocks may have
performed.
 Various stock market indexes are reported to
give investors an indication of the performance
of different groups of stocks. The most
commonly quoted index is Shanghai Composite
Stock Index based on the performance of the
stocks of 180 companies.
 Shenzhen Composite Stock Index ……
13
Shanghai & Shenzhen Stock Composite Indices
 Each index represents a sector-emphasis portfolio
or fund. If investors are interested in particular
sector of the Chinese market, the individual index
can be considered a representative benchmark of
industry sector performance.
 Index analysis is beneficial to the investor for at
least two reasons: (1) investing in indices provides
diversification, and (2) due to transparency and
corporate governance issues in China, indices
provide a vehicle for entering into the market
without the risk associated with an individual firm.
 Historical events……
14
Market Capitalization of Stock as A
Ratio to China’s GDP (Unit: billion yuan)
GDP
TMC/GDP
(%)
Negotiable Market
Capitalization
NMC/
GDP(%)
104.81
2663.8
3.93
/
/
1993
353.10
3463.4
10.20
/
/
1994
369.06
4675.9
7.89
96.48
2.06
1995
347.40
5847.8
5.94
93.79
1.60
1996
984.24
6788.5
14.50
286.70
4.22
1997
1752.92
7477.2
23.44
520.44
6.96
1998
1950.56
7955.3
24.52
574.56
7.22
1999
2647.12
8205.4
31.82
821.40
9.87
Year
Total Market
Capitalization
1992
15
A New Round of Development
Year
TMC
GDP
TMC/GDP
(%)
NMC
NMC/GDP
(%)
2000
4809.9
8940.4
53.79
1608.8
17.99
2001
4352.2
9593.3
53.79
1446.3
17.99
2002
3832.9
10239.8
45.37
1248.5
15.08
2003
4245.8
11669.4
37.43
1317.9
12.19
2004
3705.6
13651.5*
27.14
1168.9
8.56
2005
3243.0
18308.5
17.71
1063.1
5.81
2006
2007
8940.4
32714.1
21087.1
24700.0
44.70
136.31
2500.4
9305.4
11.86
38.77
16
Market Capitalization,
Billion RMB
TMC
GDP
TMC/GDP NMC
(%)
NMC/GDP
(%)
2007
32714
26581.0
136.31
9305
38.77
2008
12136
31404.5
40.45
4521
15.07
2009
15126
34090.3
45.84
5212
15.79
2010
26542
40151.3
66.10
19311
48.10
2011
21476
47310.4
45.39
16492
34.86
2012
23036
51947.0
44.35
18166
34.97
2013
23908
56884.5
42.03
19958
35.09
2014
63600.0
2015
68688.0
17
Market Capitalization
Billion yuan
70000
60000
50000
40000
30000
20000
10000
0
1992
1995
1998
2001
TMC
2004
2007
2010
2013
GDP
18
Comments
 TMC: Total market capitalization. NMC:
Negotiable market capitalization.
 In 2008, the value of tradable shares has
contracted 51.4% to the year of 2007.
 Big losses for most of retail investors in the
last year.
 In 2009, the value of tradable shares has
increased to 15125 billion yuan, raising 2.34
times.
19
Growth of Retail Investors
Year
Total Investors: million accounts
2004
72.11
2005
73.36
2006
78.54
2007
138.87
2008
2009
2013
104.50
120.37
132.47
20
Discussion
 2007: Mega-trading in stock market
 How to evaluate the market
capitalization in national economy?
 Do you know the ratio of market
capitalization to GDP in your country?
 Please make some comparisons on this
issue.
 ……
21
Comparison on TMC/GDP






UK: 158.45%
USA: 148.31%
Japan: 109.84%
France: 102.70%
Germany: 56.48%
EU: 95.78%
22
A Case of 2014/15 Stock Market
 How can we make a judgment on more
trading in Chinese stock market?
 Is it a connection between stock price
and economic situation?
23
Ⅳ. Equity Structure
 Equity in listed companies is artificially
divided into different categories of
shares in the same stock that have
different rights.
 State shares
 Legal person shares
 Public shares (or shares in circulation)
 Internal employee shares
24
Literature
 Corporate governance: a discussion on
minority shareholder protection in
China;
 Political connections and minority –
shareholder protection: evidence from
securities-market regulation in China.
25
State Shares
 State shares are held by the state and
its varied ministries, bureaus and
regional governments;
 As state shares were not tradable on
stock exchanges, the approval of the
CSRC was required to transfer between
domestic institutions.
26
 Legal personal shares are kept by other
SOEs;
 Until April 2005, legal-person owned
shares were only allowed to be
transferred between institutions. The
justification for the trading restriction
was for “control” of the company to
remain with the state-owned or
controlled shareholders.
27
Public Shares
 Public shares are retained by
individuals or private entities;
 And internal employee shares are
maintained by managers and
employees of the listing companies.
28
Concentration of Share Ownership
 To understand the ownership
structure of Chinese firm it is
important to understand how the
share structure has changed since the
commencement of the stock
exchange in the early 1990s.
29
Equity Structure of Stocks Listed on
China’s Stock Markets: Non-Tradable
Share Type
1992
%
ⅠShares not yet in
circulation
4.769
69.25
243.743
64.28
416.075
64.72
1.Founder's stock
4.035
58.59
216.540
57.11
380.571
59.20
a State shares
2.850
41.38
147.513
38.90
304.653
47.39
b Domestic legal
person shares
0.905
13.14
64.255
16.94
69.995
10.89
c Foreign legal
person shares
0.280
4.07
4.620
1.22
5.923
0.92
2.Fund-raising
legal person
shares
0.649
9.42
21.421
5.65
30.971
4.82
3.Internal employee
shares
0.085
1.23
2.429
0.64
1.097
0.17
0.000
0.00
2.462
0.65
3.436
0.53
4.Other
(transferred
allotment)
2000
%
2003
%
Billion shares
30
Discussions
 State shares remained the dominant proportion
of total shares, the proportion of state shares
in the equity structure of listed companies
increased from 38.90% in 2000 to 47.39% in
2003, an increase of 8.49%.
 The proportion of domestic legal person shares
has decreased from 16.94% in 2002 to
10.89% in 2003, while the proportion of fundraising legal person shares has fallen from
5.65% to 4.82%.
 The proportion of employee shares has also
decreased from 0.64% to 0.17% during the
period of 2000-2003.
31
Discussions
 Most listed companies have been
transformed from SOEs, listing is usually
implemented as part of the restructuring
of SOEs, and the proportion of total
capitalization accounted for by the
former SOEs’ internal reserves is defined
as founder’s stock after listing.
 Many listed companies are the profitable
parts of SOEs which were spun off, with
the SOEs retaining founder’s stock.
32
 The restrictions on the circulation of legal
person shares, the market for legal person
shares is not sufficiently lively and market
prices are unattractive low, as a result, there
has been a general decrease in mutual
investment between unrelated legal persons,
so that the proportion of fund-raising legal
person shares has gradually fallen.
 What has been happening in the structure of
equity market?
33
Agency Problem
 The concentration of ownership among listed
firms in the Chinese stock market has created
an agency problem.
 The agency problem in the Chinese context is
not the diverged interests between
management of firms and their shareholders,
but in the form of conflicting interest between
majority shareholders (state-owned
shareholding) and minority shareholders
(public shareholding).
34
Two Issues
 The first issue is the close relationship between
listed firms and their parent entities. The
closeness is the direct result of the
“privatization procedure” of SOWs in China.
 The Chinese government original purpose of
transferring SOEs into listed firms was to raise
funds for SOEs and improve their performance,
hoping that their operation could be more
efficient and responsive to market competition.
35
 The second issue is the “insider control problem”.
 State ownership means there is a lack of efficient
external monitoring of the management of listed
firms.
 The controlling power of listed SOEs is
concentrated in the hands of the directors and
senior management who share no material
interests or risks in the company but exercise
dominant power, free from the checks of market
discipline.
36
China Issue
 The principal-agent conflicts stem from the
separation of ownership and control in modern
corporations with highly dispersed ownership
structures.
 In an firm with concentrated ownership,
controlling shareholders (not managers) have
control of the firm. This has led to the
development of a new corporate governance
perspective which focuses on how resolve the
conflicts of interests between the controlling
and minority shareholders.
37
Equity Structure
 Tradable and non-tradable shares
 Share reforms: in order to reduce this
complexity, the government started a
program in April 2005 to make all
shares legally tradable.
38
Equity Structure of Stocks Listed on
China’s Stock Market: Tradable
Type
1992
2003
2005
2007
Tradable
2.118
30.75%
226.77
35.28%
249.89
34.88%
493.36
29.02%
A-Shares
1.093
15.87%
171.47
26.67%
228.08
31.84%
468.28
25.09%
B-Shares
1.025
14.88%
17.54
2.73%
21.81
3.04%
25.09
1.48%
H-Shares
0
37.76
5.87%
2008
2009
1257.9 1975.9
51.3% 75.5%
Billion shares.
39
Development of Equity Structure
2005
2006
2007
(1)Volume Issued
762.95
1492.64
2241.69
2452.3
2616.3
(2)Negotiable
Shares
291.48
563.78
1033.15
1257.9
1975.9
(2)/(1)
38.2%
37.8%
46.1%
(3)TMC
3243.03
8640.39
32714.1
12136.6
24393.9
(4)NMC
1063.05
2500.36
9305.44
4521.4
15125.9
32.8%
28.9%
28.5%
37.25%
62.01%
NMC/TMC
2008
51.30%
2009
75.5%
Unit: billion shares and billion yuan.
40
New Progress
2010
2011
2012
2013
1.Volume issues,
billion RMB
3318.4
3609.6
3839.5
4056.9
2.Negotiable shares
2564.2
2885.0
3134.0
3674.4
77.27
79.93
81.64
90.57
4.22
3.40
3.29
4.84
72.76
76.78
78.86
83.48
2/1 ratio, %
Trading volume,
Trillion
NMC/TMC,%
41
Discussion on 2007-2009
 The number of listed companies has been
increasing since the emergence of China’s
stock market.
 309 listed companies have been added for
raising funds through the stock market in 2007.
And another 125 listed companies in first half
of 2008.
 Only 13 listed companies (IPO) have been
added in January-August 2009, and another 80
for September –December 2009.
42
Number of Listed Companies
3000
2500
2000
1500
1000
500
12
20
10
20
08
20
06
20
04
20
02
20
00
20
98
19
96
19
94
19
19
92
0
No. of Listed Co.
43
Stock Market Emergence and Development
1992
1993
1994
1995
1996
1997
53
183
291
323
530
745
Listed Stocks
218
345
381
599
821
A-Share
177
287
311
514
720
B-Share
41
58
70
85
101
1998
1999
2000
2001
2002
2003
Listed Co.
851
949
1088
1160
1224
1287
Listed Stocks
931
1029
1174
1240
1310
1372
A-Share
825
921
1010
1130
1199
1261
B-Share
106
108
114
110
111
111
Listed Co.
44
Aggressive Policies in 2007
2004
2005
2006
2007 2008
1377
1381
1434
1550
1887
1985
Shanghai
837
834
842
860
1625
1638
Shenzhen
540
547
592
684
..
..
B Shares
109
109
109
109
109
109
H Shares
110
122
143
148
153
154
No. of listed
co.
2009
Big step was taken to push the stock market
forward by the government during 2007-2008.
45
No. of listed co.
Shanghai
Shenzhen
B Shares
H Shares
2010
2063
894
1169
108
2011
2342
931
1411
108
2012
2494
954
1540
107
2013
2489
953
1536
106
46
Shares in Circulation
12
20
10
20
08
/2
00
9
07
20
05
20
03
20
01
20
99
19
97
19
19
95
Billion
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Total Shares
Tradable Shares
47
Discussion on Market Features
 The role of policies in China’s stock
market……
 Discussion on the market performance
in 2009-2010.
 What kind policies has been taken since
July 2014?
48
Ⅴ. Fluctuation of Stock Market:
Booming or Bubble in 2007
 It is one of the greatest paradoxes of
the Chinese economy that its stock
market, called the A-share market, has
lost half of its value in the past five
years at end-2005, while the economy
has grown by 50%.
 The price movement of A-share market
has been completely changed since
early 2006.
49
Discussion
 In 2008, the A-share market has lost
two-third of its value, while Chinese
economy has grown by 9%.
 In 2014 and 2015, the A-share market
has entered into a new growth stage in
compared to slowing economy.
 How to understand China’s paradox?
 How to define Chinese stock market?
50
Discussions on
Early Stock Price Movements
 IPO under-pricing in China by the year of issuance
Year
1994
1995
1996
1997
1998
1999
Number of IPOs Degree of under-pricing(%)
87
314.5
20
258
189
196
100
95
93.9
74.5
50.3
56.4
 This table presents the degree of under-pricing in China
by the year of IPO issuance
51
Issues from Institutional Settings
 The abnormal return on the first day of trading
is large in China (314.5% in 1994), but
decreases over time (56.4% in 1999).
 It is revealed that the high IPO initial return to
China’s institutional characteristics including a
relatively small aggregate supply of shares in
the early stage of capital-market development,
government’s desire to encourage the public to
participate in stock market and large
information asymmetry.
 Discussion.
52
Discussion
 As China’s institutional settings for
new listings improve over time, it is
natural to observe smaller degree
of average under-pricing during the
late 1990s.
 New features for the cases of
2007/2008, 2009/2010 and
2014/2015.
53
Discussions
 The large price differentials between A
and H shares might very well be caused
by excessive liquidity or too much
money chasing too few shares in the Ashare market as capital controls
preventing arbitrage between domestic
and overseas markets.
 This is in fact how market bubbles are
built anywhere in the world at times.
54
Booming vs. Bubble?
 Unique episode in China’s stock market
was taken place in 2007.
 Much wealth will be destroyed when a
stock market bubble bursts.
 From a policy point of view, excessive
speculation should not be encouraged.
What measures will be taken?
55
Total Turnover of Stock Market
80000
70000
60000
50000
40000
30000
20000
10000
0
2000
2002
2004
2006
2008
2010
2012
2014
Turnover
56
Month Turnover in Stock Market
Billion yuan
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
12/2006
8
4
12/2008 8/2009
4
12
Month Turnover
57
Discussion
 In the first quarter 2009, turnover of Ashare market was only 9.3 trillion yuan.
 The turnover of second quarter reached
12.89 trillion yuan, and 12.14 trillion for
July-August.
 Booming in the last quarter of 2009?
 Discussion on stock market performance
between 2011 and June 2014.
58
Shanghai Composite Index
Year
2000
2001
2002
2003
2004
2005
2006
High
2125
2245
1748
1649.6
1783
1328
2698
Year
10/07
3/08
8/08
23/1/09 30/3/09
High
6124
3971
2319
1990
2380
Year
2010
2011
2012
2013
2014
3/2015
High
3306
3067
2478
2445
3300
3780
7/2009 8/2009
3412
2667
Reverse direction of stock price seems to be visible
in 2008 in comparison with that of last year.
In end-March 2010, index turns to 3100.
A rising feature of SC Index since July 2014!
59
Price Movement of Stock Price
Billion yuan
14
20
12
20
20
10
9
/2
5/
00
9
08
/2
00
8
/1
23
18
/8
/2
00
8
00
/2
/5
15
3/
20
08
06
20
04
20
02
20
20
00
7000
6000
5000
4000
3000
2000
1000
0
Shanghai Composite Index
60
 What can we give some ideas on the
price movement in China’s stock
market?
 Price fluctuation, or price up and
down……
 What will be the next step?
61
Ⅵ. Function Assessment
of China’s Stock Market
 Amount of raised-capital.
 How to assess the contribution of stock
market to national investment growth?
 What is the role of indirect financing in
national economy?
 The stock market is a minor player in
China’s financing for business.
62
 The Chinese stock market has never
been a fair game. To be permitted to go
public has long been considered a policy
favor often reserved for weak firms
(state-owned) requiring government
support.
 Which company will be permitted to go
public in the coming years? State-owned,
foreign-funded or private firms?
63
Raised-Capital in Stock Markets(1992-2004)
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
9.41
37.55
32.68
15.03
42.51
129.38
84.2
94.46
210.3
125.2
96.18
135.8
151.09
5.0
27.64
9.98
8.55
29.43
82.59
77.8
89.36
152.7
118.2
77.98
81.96
83.57
5.0
19.48
4.96
2.27
22.45
65.51
40.9
49.79
81.24
53.43
51.7
45.35
35.34
/
8.16
5.02
6.28
6.99
17.09
33.5
32.1
51.95
43.06
5.66
7.48
10.45
Other
/
/
/
/
/
/
3.4
7.48
19.52
21.72
20.62
29.13
37.78
2.B-share
4.41
3.81
3.83
3.34
4.72
10.79
2.56
0.38
1.4
0
0
0.35
2.72
3.H-share
/
0.09
18.87
3.15
8.36
36
3.8
4.72
56.22
7.02
18.2
53.47
64.81
Raised
Capital
1.A-share
IPO
Allotment
Notes: Other includes convertible bonds.
Unit: billion yuan.
64
New Trends
 The volume of raised-capital is 154.4
billion yuan for H-shares, accounting for
82% of total 188.25 billion yuan in 2005.
 As for H-share and N-share issues, the
raised-capital reached as high as 313.06
billion yuan in 2006 and 95.73 billion
yuan in 2007.
65
Raised-Capital (A-share market)
in Month Data
Billion yuan
160
140
120
100
80
60
40
20
0
12/2006
6
12/2007
6/2008
12
6
12/2009
Raised-Capital
66
Raised Capital, Billion RMB
Raised Capital
A shares
H, N shares
2006
559.43
246.37
313.06
2007
868.02
772.3
95.72
2008
385.22
345.78
31.73
2009
612.47
500.49
107.32
2010
1197.19
960.63
236,56
2011
581.42
507.31
74.11
2012
413.44
312.75
100.68
2013
386.89
280.28
106.61
2014
67
Discussion
 Can more capital be raised in this market? Yes,
new policy has been designed for the
expansion of stock market, which can attract
more capital from society: excess liquidity in
2007-2008……
 The amount of 365.7 billion yuan of capitalraising in 2008.
 Less attractive for capital-raising in the A-share
market: only 24.6 billion yuan for Q 1, 2009.
 By 2009, the amount of 571.12 billion yuan
has been raised in the domestic stock market.
68
Raised-capital of A-shares
Billion yuan
1400
1200
1000
800
600
400
200
14
20
12
20
10
20
08
20
06
20
04
20
02
20
00
20
98
19
96
19
94
19
19
92
0
Raised-Capital
69
 Huge money has been raised through
the stock market within one year.
 Can investors bear the huge pressure of
more IPOs in the stock market?
 Is it likely for the booming of stock
market again?
 China’s stock market is entering into the
new stage of development.
 ……
70
Ratio of Raised-Capital (all shares) to Fixed-Asset
Investment (FAI), billion yuan
RaisedCapital
(All shares)
Year
1992
Fixed Asset
Investment
All Shares
/FAI(%)
A-shares
A-shares
/FAI(%)
9.41
808.01
1.16
9.41
1.16
1993
37.55
1307.23
2.87
31.45
2.41
1994
32.68
1704.21
1.92
13.81
0.81
15.03
2001.93
0.75
11.89
0.59
1996
42.51
2291.35
1.86
34.15
1.49
1997
129.38
2494.11
5.19
93.38
3.74
1998
84.15
2840.62
3.16
80.36
2.83
1999
94.46
2947.52
8.68
89.74
3.04
210.32
3291.77
6.39
154.1
4.68
2001
125.23
2782.66
2.92
118.21
4.25
2002
96.18
3294.2
2.92
77.98
2.37
2003
135.78
5511.8
2.46
81.96
1.49
2004
151.99
7047.74
2.16
83.57
1.19
2013
386.89
44629.41
0.87
280.28
0.63
1995
2000
71
Discussions
 The contribution of IPO to national
capital formation is very limited. This
trend will not be changed very much in
the short run.
 Strong policy influence on the amount of
raised-capital in the past decade.
 What is the next step?
 ……
72
Ratio of Raised-Capital to FAI
Year
Raisedcapital
FAI
All shares A-Shares A-Shares
/FAI(%)
/FAI(%)
2005
188.25
8877.4
2.12
33.81
0.38
2006
559.43
10999.8
5.09
246.37
2.24
2007
843.19
13700.0
6.15
772.3
5.64
2008
2009
365.70
685.77
17282.8
22459.9
2.12
3.05
238.1
571.1
1.38
1.06
Unit: Billion yuan. FAI: Fixed-asset investment.
73
Discussions
 Different functions of direct and indirect
financing in China’s economic
development and corporate governance.
 This picture revealed that A-share
market has clear shortcomings due to
institutional problems and supervisory
system in China.
 More reform policies are needed……
74
Financial Structure
of Non-Financial Institutions in China
Total
Loans
Equity
T-bills
Co. bonds
2001
1655.5
1255.8
125.2
259.8
14.7
2006
3987.4
3268.7
224.6
267.5
226.6
2007
4970.5
3920.5
653.2
179.0
217.8
2001
100.0
75.9
7.6
15.7
0.9
2006
100.0
82.1
5.6
6.7
6.7
2007
2008
2009
100.0
100.0
100.0
78.9
82.4
80.5
13.1
5.8
3.8
3.6
1.7
6.3
4.4
10.1
9.4
Financing
%
75
Discussions
 Bank loans played much more part than
stock market in business financing in
China.
 It is unlikely for Chinese government to
change national financial channels
through increasing more IPOs in stock
markets.
 What will be happened in China’s
financial market and economy in the
coming two or three years?
76
Bullish Market in 2015?
 Everyone loves the bullish market.
 What kind of judgment can be made
in the consideration of economic
downturn today or tomorrow?
 What can we do?
 Dancing with wolfs or complaining the
stock market?
77
Questions and Problems
1. What are Chinese characteristics
for the function of stock market?
2. What are your comments on the
new measures to revitalize the
stock market?
3. Discuss the features of equity
structure of China’s stock markets.
78
4. What is H-shares, do investors like
H-shares?
5. How do you give comments on the
function of China’s stock market?
What is difference with your
country’s stock market?
6. Will the proposed share reform
policies be success or failure? Why?
Please give your answer.
79
Thank You!
80