Same same, but different: Varieties of capital markets, Chinese state capitalism and the global financial order

Abstract

Since 2009, China’s capital markets have developed and internationalized to an unprecedented degree, which has contributed to a lot of debates on China’s rise and its implications for the global financial order. Contributing to these debates, this article analyses the development of capital markets in China and their integration into global finance between 2009 and 2019, focusing on three aspects: how Chinese capital markets are developing domestically; how they are integrating with global markets; and how Chinese capital markets are internationalizing, i.e. expanding abroad. Thereby, the article analyses the crucial role of securities exchanges who as organizers of capital markets are powerful actors that exercise considerable influence over these markets and their development. This empirical investigation reveals that while they share some characteristics with ‘global’ capital markets, Chinese capital markets function quite differently. The article argues that China’s state-owned exchanges facilitate the development of state-capitalist capital markets – capital markets that follow an institutional logic derived from China’s state-capitalist economic system. Rather than giving in to a neoliberal rulebook, China’s capital markets represent an alternative to, resist and challenge the norms, principles and procedures of the contemporary global financial order. While different capital markets share some characteristics, they are institutionally embedded, and these institutional settings facilitate different institutional logics that underpin and inform the functioning of markets. Instead of viewing capital markets as homogeneous entities, the article therefore proposes to investigate a ‘varieties of capital markets’ that are shaped by different institutional logics.

It takes two to dance: Institutional dynamics and climate-related financial policies

“…The same applies to financial markets that are 'politicized' rather than 'marketized', and even to exchanges which are 'government agencies, subordinated to the China Securities Regulatory Commission (CSRC) or the People's Bank of China, and ultimately, the Chinese government' (Petry, 2020a). In contrast to the European free-market approach, this political embeddedness leads to completely different financial system that can be qualified as 'state-capitalist capital markets' (Petry, 2020b). From window guidance to direct control over publicly owned banks and exchanges, Chinese government engages on a day-to-day basis in market shaping through financial capital allocation in order to help achieve its development goals.…”

State capitalism and capital markets: Comparing securities exchanges in emerging markets

“…weapons, aviation, encryption; Hogan Lovells, 2011). Similar restrictions, albeit with higher investment limits, also exist in South Africa whereas investment into Brazilian and Korean companies is relatively liberalized with only a few restrictions on banking, mining, telecommunication, media and healthcare (Clearstream, 2020;Thomson Reuters, 2020a, 2020b.…”

The new gatekeepers of financial claims: States, passive markets, and the growing power of index providers

“…21 The Wall Street Journal, for instance, highlighted that Chinese stock exchanges threatened to cancel MSCI's access to Chinese market data in case of a non-inclusion, while Chinese asset managers allegedly halted ongoing cooperations with MSCI (Bird 2019). In addition, this unprecedented inflow of foreign capital will take place according to trading and investment rules set out by the Chinese state, including a level of market surveillance, guidance and intervention unthinkable in Western markets (Petry 2020a(Petry , 2020c. Because of the index inclusion, asset managers were 'forced into China' 22 -with index providers as intermediaries in this relationship.…”