NRI Papers
No.40   January 1, 2002
  Moving Forward in Reforming China's Capital Market  
Takeshi JINGU
        China's long march to membership in the WTO (World Trade Organization) is finally over. Some 20 years after the People's Republic launched its reform and open door policy, membership in the WTO will integrate the Chinese economy more closely with the worldwide economy. At the same time, Chinese enterprises will be forced to compete under global standards.
    This challenge has raised a number of concerns?ranging from the competitiveness of Chinese companies to social stability during this period of transition from a state-planned to market economy. This article discusses several problems affecting China's capital market, which essentially includes no mechanism for efficiently allocating capital. As this is a prerequisite for a free market economy, this deficiency could slow the progress of other reform plans now under way.
    Since 2000, however, China has been moving forward towards solving various problems in its capital market. As a well-functioning capital market will strengthen China's industries and enterprises, the time will soon come when Japanese companies can no longer afford to ignore the capital market of China when raising and placing funds.
Contents
I Increasing Importance of the Capital Market
II Accelerating Stock Market Reforms
1 Opening the Stock Market to Foreign Investors
2 Enhancing Liquidity by Reducing State-Owned Shareholding and Making Up Shortages in National Social Security Funding
3 Improving Listing and Delisting Procedures
4 Delay in Creating China's Second Board
III Improving the Government Bond Market
IV Nurturing Institutional Investors
1 Lifting the Ban on Open-End Investment Funds
2 Market Entry by Insurance Companies and Social Security Funds
3 Future of Private Placement Funds
V Tighter Supervision and Control
VI China's Capital Market Targets the Advanced Economy Model

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