China Capital Market
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Introduction
The China Capital Market aims at efficient capital allocation and generation of good corporate governance aimed at fortifying the industries and the individual companies.
There are huge volumes of speculative investment in the China Capital Market since it is disconnected and less liquid. The different characteristics of the China Capital Market May be discussed under the following heads.
Stock Market Of China
The Capital market size of the China Capital Market was 4.6 trillion Yuan as on July 2001. Out of the total volume of the stocks only 40% are traded. It is only because of this reason that the China Capital Market is less liquid. There are basically three types of shares in the China Capital Market and they
are :
- ‘A ‘ Shares : The A Shares are denominated in Yuan and are issued in China itself.
- ‘B’ Shares : These shares are issued in China but are aimed at the foreign investors. Previously they were sold exclusively to the foreign investors but now they are also available to the domestic investors.
- ‘H’ Shares: The H Shares are issued in Hong Kong and they are aimed at the foreign investors.
Government Bond Market Of China
The Government bonds have played a crucial role in channelizing domestic savings to various economic activities. The money invested in government bonds are used to finance national projects. About 60% of the funds have been used for the development western region of the country. Again the Central bank uses the government bonds to carry out their open market operations . In this way the China capital Market is used as a tool to control the economy at the macro level.
Institutional Investors and the China Capital Market
Open -end-funds were made available to the investors from September 2001. Prior to that only closed-end-fund s were available. Insurance companies and the social security funds are gaining importance day by day. The insurance companies can now invest 5% of their asset value. Private Placement Funds are also becoming increasingly important.
Supervision and Control over the China Capital Market
Due to lack of adequate corporate information and many illegal practices taking place, stocks are overprices in China Capital Market. In order to prevent such a phenomenon the China Capital Market is under tight supervision.
Due to the drawbacks in the China Capital Market there are several reforms that have been suggested.
For more details on the China Capital Market the relevant websites that can be viewed are nri.co.jp, chineseshares.cn, english.people.com, chinadaily.com etc.
