An Update on China’s Capital Markets: Focus on China’s Securities Industry

Abstracts

Despite all the ups and downs, China’s capital markets have developed at a very rapid pace over the past 20 years. The market size is growing and systems are gradually being updated. Investors are becoming more mature, and a legal system, regulatory framework, and trading rules have basically been established. Although there is a great deal of room for improvement in China’s capital markets, they are playing an increasingly important role in the overall economy. Nevertheless, we should bear in mind that China is still an emerging entity and some issues in the market need to be addressed to achieve greater efficiency. Those issues include an unbalanced financing structure, a lagging fixed income market, an insignificant role played by institutional investors, and the need to improve the quality of information disclosure and drive market innovation. As a key component of China’s economy, China’s capital markets currently are not functioning efficient enough as a vehicle of capital allocation, with the major reasons being market operational inefficiencies.