Institutional Investors in Chinese Stock Markets

Abstract

From 1993 to 2013, the institutional investors in China’s capital market have been booming. The types of investors have expanded dramatically, from solely public offering fund companies to more than 10 types of institution, such as the Social Security Fund, insurance asset management companies, assets managements under securities companies, trust companies and so on. At the end of 2012, the NPC Standing Committee adopted the revised Law of Investment Securities Fund in which they specially added the tenth chapter, Non-Public Offer Fund, bringing non-public offer funds under supervision. This is the first time the legal status of non-public offer fund was recognized. In June 2013, the Office of Central Institutional Organization Commission issued Notification of Assignment of Responsibility Regarding Private Equity Fund, which clarified that the private equity (PE) Fund is under the supervision of the CSRC (China Securities Regulatory Commission). As a result, they also have become institutional investors in capital markets under the governance of the CSRC. The growth of institutional investors in Chinese capital markets has had some difficulties. However, they are a force that cannot be ignored. The market value of their shareholdings has boosted, from five funds of CNY4 billion (less than 1 percent of the whole market value in 1998) to 10 percent at a valuation of CNY2.25 trillion now. This is tremendous progress. In the domestic capital market they function not only as a resources allocator, but also a value guide. However, because of its unique development history, the Chinese stock market’s investor structure of a high percentage of individual investors but a low percentage of institutional investors is very different when compared to a mature market.