CHINA'S SECURITIES EXPERIMENT: THE CHALLENGE OF GLOBALIZATION
(Jiangyu Wang)

INTRODUCTION

As the world's seventh largest and fastest growing economy, the People's Republic of China (PRC or China) has a relatively small securities market. However, since China's securities market is the world's youngest one as well, its growing speed is impressive.

China's securities market should draw international attention by virtue of two features: First, it is the only securities market in the world in which a majority of listed companies are State-owned companies. Second, it represents one of the world's biggest privatization movements, because China's State-owned enterprises are gradually being privatized through issuing stocks in the market and other means. In other words, the communist China is embracing capitalism through securities markets. Moreover, due to China's huge economic scale and rapidly increasing rate, its securities market will become a extremely attractive draw for international capital.

This article will examine the development of China's securities market, explore some resulting paradoxes, and discuss how to solve them. Part I of this article will describe the historical development of the market and its current scale. The emergence and development of the securities market in China truly reflects the transition of a once soviet country from pure socialist public ownership to a mixed economy, namely, part socialism and part capitalism. Part II presents a comprehensive description of the legal framework of China's securities markets, including securities issuance and trading, and market regulations. In this part I will also describe how this framework affected by international, especially by western community. Part III gives a detailed discussion on foreign involvement in the market, particularly on B shares which can be traded by foreigners, and on China's overseas listings. Part IV explores the GATS's impacts on China's securities market, indicating that, to meet the WTO requirements, China must conduct reforms to nondiscriminatively admit foreign firms into its domestic markets. These two parts essentially reflect the influence of financial globalization on China. Part V analyzes current problems that might stifle the further development of China's securities markets, concluding that, in order to foster a successful securities market, China's only solution is to foster privatization of its State-owned enterprises.

(Footnote Omitted)