China’s Stock Exchanges

Abstract

Shanghai’s beautiful new stock exchange building in Pudong houses one of the most advanced electronic trading centers in the world and is a matched set with that of Shenzhen. Both exchanges give the appearance of long established markets which have just completed a full upgrade in preparation for the next millennium. In fact, China’s experience with securities markets does extend back into a long forgotten history of over one hundred years. Before the 1949 revolution China had active stock exchanges in Shanghai, Tianjin and Beijing. The forerunner of the Shanghai exchange was established in 1891 and the other two during the early years of the Republic period, 1910–20. All primarily traded government debt securities. The last of the three, the Tianjin exchange, was closed in mid-1952, marking the start of China’s experiment with a Soviet-style planned economy. As time went on the political climate in China grew increasingly hostile to securities and securities exchanges. Even as recently as 1992 investment bankers searched for ways to say ‘privatization’ in Chinese without saying privatization (siyouhua) in deference to their audiences It seemed unthinkable that exchanges could exist without private companies. Of course, eight years later nothing resembling privatization has happened, but Chinese now use the previously forbidden word freely and the state has begun to reduce its demand for absolute majority control of listed companies.