Equity Politics and Market Institutions: The Development of Stock Market Policy and Regulation in China, 1984-2003

Abstract

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Financial Sector Development and Growth: The Chinese Experience

“…As we have argued before in this paper, investigating the role of financial institutions and markets at the provincial level can give more insights into China's experience than studying the country as a whole. Even though the Chinese political system is unitary rather than federal -in that all the provincial leaders are appointed directly by the senior political leadership (Green 2004) -it is well recognized that provinces in China are quite heterogeneous in terms of their institutions as well as their economic development. For example, Krug and Hendrischke (2001) clearly refute the assumption that China can be treated as country with homogenous culture, because: 'the regional variations (or different "cultures") within China might find their explanations in the different practices remembered and revised by locally entrenched networks and/or negotiated between firms and political authorities responsible for the implementation of reforms'.…”

“…However, at the same time, local leaders retained significant influence over the listing process and the enforcement of secondary market regulation. Green (2004) remarks that this period (1993-96) was plagued with capital market crises, largely caused by the actions of local officials.…”

“…Also based on the cross-country analysis, Zervos (1996, 1998) research the role of stock markets and the banking sector, and conclude that stock market liquidity and bank development are robustly correlated with economic growth. What is more interesting to financial economists is the role of market institutions, and in the sense that market institutions define property rights, 3 a complex set of institutions must be created to ensure that use and trading in these rights is fair and transparent and that abuses are appropriately punished (Green 2004). At the same time, the weakness of institutions in developing countries is well identified, for example, Aron (2000) argues that institutions in some developing countries are weak because such rules are simply absent, suboptimal, or poorly enforced when the costs of monitoring and enforcement prove too high.…”

Volatility Spillovers from the Chinese Stock Market to Economic Neighbours

“…The Chinese stock market has also grown significantly since its inception ment to try and develop a financial system that is better adjusted and secure. Green [12] identifies three distinct periods or phases of institutional change:…”

“…. (They) have been operated more as divisions of the CSRC than as independent business" (Green,[12,p.24]).…”