Topic 5 China's Capital Markets I - zongxinqian.com · Topic 5 China’s Capital Markets I Zongxin...
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Topic 5 China’s Capital Markets I Zongxin Qian Brief history 1978-1992 1993-1998 1999-2007 Reforms Non-tradable shares Issuance system Impact assessment Market structure Current market situation Supervision framework Topic 5 China’s Capital Markets I Zongxin Qian School of Finance, Renmin University of China July 10, 2014
Transcript of Topic 5 China's Capital Markets I - zongxinqian.com · Topic 5 China’s Capital Markets I Zongxin...
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Topic 5 China’s Capital Markets I
Zongxin Qian
School of Finance, Renmin University of China
July 10, 2014
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Table of Contents
1 Brief history1978-19921993-19981999-2007
2 ReformsNon-tradable sharesIssuance systemImpact assessment
3 Market structure
4 Current market situation
5 Supervision framework
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Three phases
The CRSC divides the history of China’s capital markets intothree phases
1978-1992, China’s capital markets began to emerge
1993-1998, National capital markets began to emerge
1999-2007, Further regulation and development of thecapital markets
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Three phases
The CRSC divides the history of China’s capital markets intothree phases
1978-1992, China’s capital markets began to emerge
1993-1998, National capital markets began to emerge
1999-2007, Further regulation and development of thecapital markets
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Three phases
The CRSC divides the history of China’s capital markets intothree phases
1978-1992, China’s capital markets began to emerge
1993-1998, National capital markets began to emerge
1999-2007, Further regulation and development of thecapital markets
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Three phases
The CRSC divides the history of China’s capital markets intothree phases
1978-1992, China’s capital markets began to emerge
1993-1998, National capital markets began to emerge
1999-2007, Further regulation and development of thecapital markets
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of stocks, bonds andfutures
1986, Provisions for Furthering Reform and RevitalizingEnterprises: SOE restructuring became a national strategy
1981, treasury bonds
1982, enterprise bonds
1984, financial bonds
1990, forward contracts (Zhengzhou Grain WholesaleMarket)
1992, “Standard Contract for Special Grade AluminumFutures”Shenzhen Nonferrous Metals Futures Exchange
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Funds raised by various securities
Figure 1.1 Funds raised by various securities, 1981-1992Source: CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1978-1992: the emergence of secondary markets
First brokage service: Shenyang Trust and InvestmentCorporation (1986)
First OTC trading of shares: Jing’an District Branch ofthe Shanghai Trust and Investment Company (1986)
OTC trading of treasury bonds allowed (1988)
Shanghai and Shenzhen securities exchange (1990)
Shanghai and Shenzhen composite index (1991; startedfrom 100 points).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The rise and fall of Hong Miao Zi market
Source: FTchinese
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The 8.10 incident
Source: FTchinese
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The lottery ticket for stock purchase
Source: FTchinese
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the regulatoryframework
May 1992, Securities Supervision Office of PBC
October 1992, SCSC and CSRC
November 1997, separation of operation and supervisionof banking, securities, and insuranceThis is similar to the Glass-Steagall Act (1933-1999) ofthe US.
April 1998, consolidating the supervisory functions ofSCSC and PBC into the CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the regulatoryframework
May 1992, Securities Supervision Office of PBC
October 1992, SCSC and CSRC
November 1997, separation of operation and supervisionof banking, securities, and insuranceThis is similar to the Glass-Steagall Act (1933-1999) ofthe US.
April 1998, consolidating the supervisory functions ofSCSC and PBC into the CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the regulatoryframework
May 1992, Securities Supervision Office of PBC
October 1992, SCSC and CSRC
November 1997, separation of operation and supervisionof banking, securities, and insuranceThis is similar to the Glass-Steagall Act (1933-1999) ofthe US.
April 1998, consolidating the supervisory functions ofSCSC and PBC into the CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the regulatoryframework
May 1992, Securities Supervision Office of PBC
October 1992, SCSC and CSRC
November 1997, separation of operation and supervisionof banking, securities, and insuranceThis is similar to the Glass-Steagall Act (1933-1999) ofthe US.
April 1998, consolidating the supervisory functions ofSCSC and PBC into the CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the regulatoryframework
May 1992, Securities Supervision Office of PBC
October 1992, SCSC and CSRC
November 1997, separation of operation and supervisionof banking, securities, and insuranceThis is similar to the Glass-Steagall Act (1933-1999) ofthe US.
April 1998, consolidating the supervisory functions ofSCSC and PBC into the CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the legal framework
April 1993, Provisional Regulation on the Issuing andTrading of Shares
June 1993, Implementation Rules on InformationDisclosures of Companies Issuing Public Shares
August 1993, Provisional Measures on ProhibitingFraudulent Conducts Relating to Securities
July 1994, Company Law (issuance and transfer of shares)
October 1996, Circular on Prohibiting Securities MarketManipulation
November 1997, Provisional Administrative Procedures onSecurities Investment Funds
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: development of the legal framework
April 1993, Provisional Regulation on the Issuing andTrading of Shares
June 1993, Implementation Rules on InformationDisclosures of Companies Issuing Public Shares
August 1993, Provisional Measures on ProhibitingFraudulent Conducts Relating to Securities
July 1994, Company Law (issuance and transfer of shares)
October 1996, Circular on Prohibiting Securities MarketManipulation
November 1997, Provisional Administrative Procedures onSecurities Investment Funds
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: stock issuance and IPO pricing
a quota on the maximum number of shares that could beissued each year
provincial governments and industry supervising bodiesrecommend enterprises for listing
The CSRC would then give final approval on publicofferings
Issue price of a new share = Profit after tax per share×price earning ratio of the issue
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: stock issuance and IPO pricing
a quota on the maximum number of shares that could beissued each year
provincial governments and industry supervising bodiesrecommend enterprises for listing
The CSRC would then give final approval on publicofferings
Issue price of a new share = Profit after tax per share×price earning ratio of the issue
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: stock issuance and IPO pricing
a quota on the maximum number of shares that could beissued each year
provincial governments and industry supervising bodiesrecommend enterprises for listing
The CSRC would then give final approval on publicofferings
Issue price of a new share = Profit after tax per share×price earning ratio of the issue
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: stock issuance and IPO pricing
a quota on the maximum number of shares that could beissued each year
provincial governments and industry supervising bodiesrecommend enterprises for listing
The CSRC would then give final approval on publicofferings
Issue price of a new share = Profit after tax per share×price earning ratio of the issue
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1993-1998: stock issuance and IPO pricing
a quota on the maximum number of shares that could beissued each year
provincial governments and industry supervising bodiesrecommend enterprises for listing
The CSRC would then give final approval on publicofferings
Issue price of a new share = Profit after tax per share×price earning ratio of the issue
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Funds raised by various securities
Source: CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
financial openness
B-shares: domestically-listed shares, denominated inRenminbi but subscribed to and traded in US or HongKong dollars by overseas investors.
listing of domestic companies in Hong Kong (H-shares)
listing of domestic companies in New York (N shares)
listing of PRC companies incorporated overseas in HongKong (red chips)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
financial openness
B-shares: domestically-listed shares, denominated inRenminbi but subscribed to and traded in US or HongKong dollars by overseas investors.
listing of domestic companies in Hong Kong (H-shares)
listing of domestic companies in New York (N shares)
listing of PRC companies incorporated overseas in HongKong (red chips)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
financial openness
B-shares: domestically-listed shares, denominated inRenminbi but subscribed to and traded in US or HongKong dollars by overseas investors.
listing of domestic companies in Hong Kong (H-shares)
listing of domestic companies in New York (N shares)
listing of PRC companies incorporated overseas in HongKong (red chips)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Initial developments of the futures markets
December 1992, Treasury bond (T-bond) futures wereintroduced
November 1993, Circular on Preventing RecklessDevelopment of the Futures Market
May 1994, Instructions Requested for Certain Opinions onResolutely Preventing Reckless Development of theFutures Market
1995, 327 T-Bond Futures incident
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Initial developments of the futures markets
December 1992, Treasury bond (T-bond) futures wereintroduced
November 1993, Circular on Preventing RecklessDevelopment of the Futures Market
May 1994, Instructions Requested for Certain Opinions onResolutely Preventing Reckless Development of theFutures Market
1995, 327 T-Bond Futures incident
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Initial developments of the futures markets
December 1992, Treasury bond (T-bond) futures wereintroduced
November 1993, Circular on Preventing RecklessDevelopment of the Futures Market
May 1994, Instructions Requested for Certain Opinions onResolutely Preventing Reckless Development of theFutures Market
1995, 327 T-Bond Futures incident
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Initial developments of the futures markets
December 1992, Treasury bond (T-bond) futures wereintroduced
November 1993, Circular on Preventing RecklessDevelopment of the Futures Market
May 1994, Instructions Requested for Certain Opinions onResolutely Preventing Reckless Development of theFutures Market
1995, 327 T-Bond Futures incident
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
327 T-Bond Futures incident
327 is the series number of a futures contract on the3-year T-Bond to be delivered in June 1995
Background: high inflation in 1994 and the interest ratesubsidy as an inflation risk hedge
Market participants bet on the uncertainty surrounding thesubsidy
The futures margin was only 2.5%, three-monthannualized return of the was 20%.major players
1 long: China economic development Trust InvestmentCompany
2 short: Wangguo securities, Liaoning Guofa
From 16:22:13 to 16: 30, February 23, 1995, WanguoSecurities placed a massive sell order of 7 million contractsworth of USD 16.8 billion, which cut the closing price toUSD17.66, from the highest of USD18.12 that day
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The consequence of the 327 T-bond futuresincident
Source: Sina finance
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1999-2007: further regulations and developmentsof the markets
July 1999, The Securities Law
2002, special securities crime investigation bureau ofCSRC; Securities Crime Investigation Bureau of theMinistry of Public Security
2007, separate inspection and sanctions functions withinthe CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1999-2007: further regulations and developmentsof the markets
July 1999, The Securities Law
2002, special securities crime investigation bureau ofCSRC; Securities Crime Investigation Bureau of theMinistry of Public Security
2007, separate inspection and sanctions functions withinthe CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1999-2007: further regulations and developmentsof the markets
July 1999, The Securities Law
2002, special securities crime investigation bureau ofCSRC; Securities Crime Investigation Bureau of theMinistry of Public Security
2007, separate inspection and sanctions functions withinthe CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
1999-2007: further regulations and developmentsof the markets
July 1999, The Securities Law
2002, special securities crime investigation bureau ofCSRC; Securities Crime Investigation Bureau of theMinistry of Public Security
2007, separate inspection and sanctions functions withinthe CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Funds raised by various securities
Source: CSRC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Qiong Min Yuan incident
its share price rocketed 1,059% in 1996
USD 79 million of its capital surplus, as well as USD 68.1million out of the USD 68.7 million in profits as stated inits 1996 annual report, were fictitious
2003 (the year of SARS), 77.12 % of the shares of QiongMin Yuan was sold to Changchun Yeli at a price of zero
The reason for the zero price is that the evaluated netasset of the company was negative. However,according toan earlier report, the net asset by 1998 was 1 billion yuan.
2007, Min Yuan building was transferred to Beijing Yeli (8.24), then Beijing Yeli sold its assets to Huayuan real estateat the price of 521 million yuan (8. 30). The shares arethen sold to SOHO China at the price of 721 million yuan.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Minyuan building
Source: baidu photo
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The building was titled the NO.1 failed real estateproject
Source: baidu photo
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
SOHO2 concept figure
Source: baidu photo
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Yin Guangxia Incident
1999-2000, the company announced false profits of USD 89.6million. The stock fell by the maximum permitted 10% eachday for 10 days when this was found out.
suspicious points
Annual profit rate in 2000 was reported to be 46%, morethan 20% higher than industry average
According to the reported export value, it should havetax-free benefit. But this was not in its financial reports.Its value-added tax was also too low to justify its hugeprofit.
The German importer was too small (with capital level ofonly 100,000 DM) to afford such a huge order (6 billionyuan)
The claimed production scale was not credible.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Yin Guangxia Incident
1999-2000, the company announced false profits of USD 89.6million. The stock fell by the maximum permitted 10% eachday for 10 days when this was found out. suspicious points
Annual profit rate in 2000 was reported to be 46%, morethan 20% higher than industry average
According to the reported export value, it should havetax-free benefit. But this was not in its financial reports.Its value-added tax was also too low to justify its hugeprofit.
The German importer was too small (with capital level ofonly 100,000 DM) to afford such a huge order (6 billionyuan)
The claimed production scale was not credible.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Yin Guangxia Incident
1999-2000, the company announced false profits of USD 89.6million. The stock fell by the maximum permitted 10% eachday for 10 days when this was found out. suspicious points
Annual profit rate in 2000 was reported to be 46%, morethan 20% higher than industry average
According to the reported export value, it should havetax-free benefit. But this was not in its financial reports.Its value-added tax was also too low to justify its hugeprofit.
The German importer was too small (with capital level ofonly 100,000 DM) to afford such a huge order (6 billionyuan)
The claimed production scale was not credible.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Yin Guangxia Incident
1999-2000, the company announced false profits of USD 89.6million. The stock fell by the maximum permitted 10% eachday for 10 days when this was found out. suspicious points
Annual profit rate in 2000 was reported to be 46%, morethan 20% higher than industry average
According to the reported export value, it should havetax-free benefit. But this was not in its financial reports.Its value-added tax was also too low to justify its hugeprofit.
The German importer was too small (with capital level ofonly 100,000 DM) to afford such a huge order (6 billionyuan)
The claimed production scale was not credible.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The Yin Guangxia Incident
1999-2000, the company announced false profits of USD 89.6million. The stock fell by the maximum permitted 10% eachday for 10 days when this was found out. suspicious points
Annual profit rate in 2000 was reported to be 46%, morethan 20% higher than industry average
According to the reported export value, it should havetax-free benefit. But this was not in its financial reports.Its value-added tax was also too low to justify its hugeprofit.
The German importer was too small (with capital level ofonly 100,000 DM) to afford such a huge order (6 billionyuan)
The claimed production scale was not credible.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The newspaper reported the misreporting of YinGuangxia
Source: baidu photo
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Market manipulation of “ZhongkeVenture”(1998-2001)
buy and sell the shares using up to 1,500 accounts withoutany actual change of ownership
held up to 55.36% of total tradable shares
soar by over 1,000% to USD 10.15 per share
by the end of 2000, the stock price fell sharply to USD1.57 per share
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Market manipulation of “ZhongkeVenture”(1998-2001)
buy and sell the shares using up to 1,500 accounts withoutany actual change of ownership
held up to 55.36% of total tradable shares
soar by over 1,000% to USD 10.15 per share
by the end of 2000, the stock price fell sharply to USD1.57 per share
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Market manipulation of “ZhongkeVenture”(1998-2001)
buy and sell the shares using up to 1,500 accounts withoutany actual change of ownership
held up to 55.36% of total tradable shares
soar by over 1,000% to USD 10.15 per share
by the end of 2000, the stock price fell sharply to USD1.57 per share
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Market manipulation of “ZhongkeVenture”(1998-2001)
buy and sell the shares using up to 1,500 accounts withoutany actual change of ownership
held up to 55.36% of total tradable shares
soar by over 1,000% to USD 10.15 per share
by the end of 2000, the stock price fell sharply to USD1.57 per share
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Market manipulation of “ZhongkeVenture”(1998-2001)
buy and sell the shares using up to 1,500 accounts withoutany actual change of ownership
held up to 55.36% of total tradable shares
soar by over 1,000% to USD 10.15 per share
by the end of 2000, the stock price fell sharply to USD1.57 per share
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Table of Contents
1 Brief history1978-19921993-19981999-2007
2 ReformsNon-tradable sharesIssuance systemImpact assessment
3 Market structure
4 Current market situation
5 Supervision framework
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The share-split
shares publicly offered by a listed company were tradableon a stock exchange
all shares before public offering were still unlisted andnon-tradable
By December 2005, the non-tradable shares account for64% of the total shares
a huge source of uncertainty
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The share-split
shares publicly offered by a listed company were tradableon a stock exchange
all shares before public offering were still unlisted andnon-tradable
By December 2005, the non-tradable shares account for64% of the total shares
a huge source of uncertainty
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The share-split
shares publicly offered by a listed company were tradableon a stock exchange
all shares before public offering were still unlisted andnon-tradable
By December 2005, the non-tradable shares account for64% of the total shares
a huge source of uncertainty
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The share-split
shares publicly offered by a listed company were tradableon a stock exchange
all shares before public offering were still unlisted andnon-tradable
By December 2005, the non-tradable shares account for64% of the total shares
a huge source of uncertainty
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The share-split
shares publicly offered by a listed company were tradableon a stock exchange
all shares before public offering were still unlisted andnon-tradable
By December 2005, the non-tradable shares account for64% of the total shares
a huge source of uncertainty
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Origins of the issue
Economic transition
Concerns on lost of state assets
Desire for controls over large firms
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Problems
non-tradable share holders are less concerned with marketprice
tradable shares too small to affect management decision
market illiquid and volatile
force efficient firms to go public overseas
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Problems
non-tradable share holders are less concerned with marketprice
tradable shares too small to affect management decision
market illiquid and volatile
force efficient firms to go public overseas
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Problems
non-tradable share holders are less concerned with marketprice
tradable shares too small to affect management decision
market illiquid and volatile
force efficient firms to go public overseas
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Problems
non-tradable share holders are less concerned with marketprice
tradable shares too small to affect management decision
market illiquid and volatile
force efficient firms to go public overseas
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Problems
non-tradable share holders are less concerned with marketprice
tradable shares too small to affect management decision
market illiquid and volatile
force efficient firms to go public overseas
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Progress
May 2005, first batch (Sany Heavy Industry, ZijiangEnterprise, Jinniu Energy, and Tsinghua TongfangComputer) participated in the pilot program
June 2005, second batch (42 firms) participated in thepilot program
Nov. 2005, 39 major SOEs participated in the reform
April 2011, Listed companies that represented 99.32% ofthe market capitalization completed the reform or startedthe process.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Progress
May 2005, first batch (Sany Heavy Industry, ZijiangEnterprise, Jinniu Energy, and Tsinghua TongfangComputer) participated in the pilot program
June 2005, second batch (42 firms) participated in thepilot program
Nov. 2005, 39 major SOEs participated in the reform
April 2011, Listed companies that represented 99.32% ofthe market capitalization completed the reform or startedthe process.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Progress
May 2005, first batch (Sany Heavy Industry, ZijiangEnterprise, Jinniu Energy, and Tsinghua TongfangComputer) participated in the pilot program
June 2005, second batch (42 firms) participated in thepilot program
Nov. 2005, 39 major SOEs participated in the reform
April 2011, Listed companies that represented 99.32% ofthe market capitalization completed the reform or startedthe process.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Progress
May 2005, first batch (Sany Heavy Industry, ZijiangEnterprise, Jinniu Energy, and Tsinghua TongfangComputer) participated in the pilot program
June 2005, second batch (42 firms) participated in thepilot program
Nov. 2005, 39 major SOEs participated in the reform
April 2011, Listed companies that represented 99.32% ofthe market capitalization completed the reform or startedthe process.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Progress
May 2005, first batch (Sany Heavy Industry, ZijiangEnterprise, Jinniu Energy, and Tsinghua TongfangComputer) participated in the pilot program
June 2005, second batch (42 firms) participated in thepilot program
Nov. 2005, 39 major SOEs participated in the reform
April 2011, Listed companies that represented 99.32% ofthe market capitalization completed the reform or startedthe process.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The case of Sany heavy industry
Non-tradable share-holders pay each tradable share-holder3 stocks and 8 yuan per 10 shares in exchange for thetrading rights of the non-tradable shares.
Reason for the payment is a compensation for the impacton market price
A promise of the non-tradable share-holders: not to tradewithin 12 months after obtaining the rights
A promise of the dominating share-holder: after the initial12 months, the amount sold must be lower than5%(10%) the total number of the company’s shareswithin the next 12 (24) months.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The case of Sany heavy industry
Non-tradable share-holders pay each tradable share-holder3 stocks and 8 yuan per 10 shares in exchange for thetrading rights of the non-tradable shares.
Reason for the payment is a compensation for the impacton market price
A promise of the non-tradable share-holders: not to tradewithin 12 months after obtaining the rights
A promise of the dominating share-holder: after the initial12 months, the amount sold must be lower than5%(10%) the total number of the company’s shareswithin the next 12 (24) months.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The case of Sany heavy industry
Non-tradable share-holders pay each tradable share-holder3 stocks and 8 yuan per 10 shares in exchange for thetrading rights of the non-tradable shares.
Reason for the payment is a compensation for the impacton market price
A promise of the non-tradable share-holders: not to tradewithin 12 months after obtaining the rights
A promise of the dominating share-holder: after the initial12 months, the amount sold must be lower than5%(10%) the total number of the company’s shareswithin the next 12 (24) months.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The case of Sany heavy industry
Non-tradable share-holders pay each tradable share-holder3 stocks and 8 yuan per 10 shares in exchange for thetrading rights of the non-tradable shares.
Reason for the payment is a compensation for the impacton market price
A promise of the non-tradable share-holders: not to tradewithin 12 months after obtaining the rights
A promise of the dominating share-holder: after the initial12 months, the amount sold must be lower than5%(10%) the total number of the company’s shareswithin the next 12 (24) months.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The case of Sany heavy industry
Non-tradable share-holders pay each tradable share-holder3 stocks and 8 yuan per 10 shares in exchange for thetrading rights of the non-tradable shares.
Reason for the payment is a compensation for the impacton market price
A promise of the non-tradable share-holders: not to tradewithin 12 months after obtaining the rights
A promise of the dominating share-holder: after the initial12 months, the amount sold must be lower than5%(10%) the total number of the company’s shareswithin the next 12 (24) months.
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Stock market performance after the reform
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
2,600
2,800
3,000
Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Dec-05 Mar-06 May-06 Jul-06 Aug-06 Nov-06 Dec-06
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
SSE Composite % of listed companies starting the restructuring
First pilote program
announced (April 2005)
Second pilote program
announced (June 2005)
Program extended to all listed companies
(August 2005)
Source: Beltratti et al. (2011)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Before-reform characteristics and investor reactionsto the reform
Abnormal returns have been larger in firms
with stronger monitoring on the part of large shareholders
with a larger potential for privatization
in firms neglected by institutional investors
not traded by international investors through H-shares
In summary, “investors have marked up the prices of firms thathad the best potential to profit from the reform” (Beltratti etal., 2011).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Before-reform characteristics and investor reactionsto the reform
Abnormal returns have been larger in firms
with stronger monitoring on the part of large shareholders
with a larger potential for privatization
in firms neglected by institutional investors
not traded by international investors through H-shares
In summary, “investors have marked up the prices of firms thathad the best potential to profit from the reform” (Beltratti etal., 2011).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Before-reform characteristics and investor reactionsto the reform
Abnormal returns have been larger in firms
with stronger monitoring on the part of large shareholders
with a larger potential for privatization
in firms neglected by institutional investors
not traded by international investors through H-shares
In summary, “investors have marked up the prices of firms thathad the best potential to profit from the reform” (Beltratti etal., 2011).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Before-reform characteristics and investor reactionsto the reform
Abnormal returns have been larger in firms
with stronger monitoring on the part of large shareholders
with a larger potential for privatization
in firms neglected by institutional investors
not traded by international investors through H-shares
In summary, “investors have marked up the prices of firms thathad the best potential to profit from the reform” (Beltratti etal., 2011).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Before-reform characteristics and investor reactionsto the reform
Abnormal returns have been larger in firms
with stronger monitoring on the part of large shareholders
with a larger potential for privatization
in firms neglected by institutional investors
not traded by international investors through H-shares
In summary, “investors have marked up the prices of firms thathad the best potential to profit from the reform” (Beltratti etal., 2011).
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Reform in the issuance system
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The public offering review committee
Established in September 1999
Members from government, stock exchanges, andacademia
At 2/3 votes of 9 members needed to pass an application
December 2003,number of members reduced from 80 to25 (13 full-time)
5/7 votes needed to pass
Voting members are known prior to each meeting (theywere anonymous before the reform)
May 2007, number of full-time members increased to 17
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The public offering review committee
Established in September 1999
Members from government, stock exchanges, andacademia
At 2/3 votes of 9 members needed to pass an application
December 2003,number of members reduced from 80 to25 (13 full-time)
5/7 votes needed to pass
Voting members are known prior to each meeting (theywere anonymous before the reform)
May 2007, number of full-time members increased to 17
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The public offering review committee
Established in September 1999
Members from government, stock exchanges, andacademia
At 2/3 votes of 9 members needed to pass an application
December 2003,number of members reduced from 80 to25 (13 full-time)
5/7 votes needed to pass
Voting members are known prior to each meeting (theywere anonymous before the reform)
May 2007, number of full-time members increased to 17
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The public offering review committee
Established in September 1999
Members from government, stock exchanges, andacademia
At 2/3 votes of 9 members needed to pass an application
December 2003,number of members reduced from 80 to25 (13 full-time)
5/7 votes needed to pass
Voting members are known prior to each meeting (theywere anonymous before the reform)
May 2007, number of full-time members increased to 17
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The sponsorship system
Securities companies and four AMCs with at least twoqualified representatives can serve as a sponsoringinstitution.
One representative can work on one case at a time
Investigation responsibilities of the followings
the basic information regarding the applicant
industry development, supply chain, production, sales,R&D, technology, etc.
within industry competition, connected transaction
management team
organization and internal control
financial and accounting information
business targets
usage of external funding
risks
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The sponsorship system
Securities companies and four AMCs with at least twoqualified representatives can serve as a sponsoringinstitution.
One representative can work on one case at a time
Investigation responsibilities of the followings
the basic information regarding the applicant
industry development, supply chain, production, sales,R&D, technology, etc.
within industry competition, connected transaction
management team
organization and internal control
financial and accounting information
business targets
usage of external funding
risks
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
The sponsorship system
Securities companies and four AMCs with at least twoqualified representatives can serve as a sponsoringinstitution.
One representative can work on one case at a time
Investigation responsibilities of the followings
the basic information regarding the applicant
industry development, supply chain, production, sales,R&D, technology, etc.
within industry competition, connected transaction
management team
organization and internal control
financial and accounting information
business targets
usage of external funding
risks
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
IPO pricing and allocation
Before 2005, upper limit on the price-earning ratio, nodistinction between firms
2005, inquiry system
quota→ lottery without quota → allotment according totradable share-holding →inquiry system
1 decide price according to allotments and inquiries toinstitutional investors
2 sell the remaining shares on-line with the decided price3 application for a purchase must be supported by depositing
the full amount of money into a specified bank accountprior to the purchase
4 lower and upper limit on the purchase5 when demand>supply, a lottery decides the allocation
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
IPO pricing and allocation
Before 2005, upper limit on the price-earning ratio, nodistinction between firms
2005, inquiry system
quota→ lottery without quota → allotment according totradable share-holding →inquiry system
1 decide price according to allotments and inquiries toinstitutional investors
2 sell the remaining shares on-line with the decided price3 application for a purchase must be supported by depositing
the full amount of money into a specified bank accountprior to the purchase
4 lower and upper limit on the purchase5 when demand>supply, a lottery decides the allocation
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
IPO pricing and allocation
Before 2005, upper limit on the price-earning ratio, nodistinction between firms
2005, inquiry system
quota→ lottery without quota → allotment according totradable share-holding →inquiry system
1 decide price according to allotments and inquiries toinstitutional investors
2 sell the remaining shares on-line with the decided price3 application for a purchase must be supported by depositing
the full amount of money into a specified bank accountprior to the purchase
4 lower and upper limit on the purchase5 when demand>supply, a lottery decides the allocation
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
IPO pricing and allocation
Before 2005, upper limit on the price-earning ratio, nodistinction between firms
2005, inquiry system
quota→ lottery without quota → allotment according totradable share-holding →inquiry system
1 decide price according to allotments and inquiries toinstitutional investors
2 sell the remaining shares on-line with the decided price3 application for a purchase must be supported by depositing
the full amount of money into a specified bank accountprior to the purchase
4 lower and upper limit on the purchase5 when demand>supply, a lottery decides the allocation
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Deviation of stock prices from fundamental(percentage)
–100
–80
–60
–40
–20
0
20
40
60
80
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009–100
–80
–60
–40
–20
0
20
40
60
80
Source: de Bondt et al. (2014)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Impact of liberalizing reforms on stock market price
Impact horizon in months 0 1 3 6 12 18 24 30 36 42
Liberalizingreform impact
5.80(7.85)
�1.26(8.07)
�1.02(5.99)
3.87(5.07)
8.42(4.67)
11.63**(3.77)
10.97**(2.87)
9.31**(2.38)
5.06*(2.23)
3.15(1.99)
Adjusted R2 0.00 �0.01 0.01 0.00 0.06 0.18 0.22 0.19 0.07 0.03
Source: de Bondt et al. (2014)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Impact of excess liquidity supply on stock marketprice
Panel D: Sub-sample with positive excess liquidity, joint specification with reform impactPositive excess M2 growth 1.35*
(0.63)1.49*(0.60)
1.55*(0.60)
1.60*(0.62)
1.62*(0.73)
1.63(0.89)
Liberalizing reform, 2-year horizon 5.90*(2.45)
6.10*(2.36)
6.27**(2.31)
6.42**(2.29)
6.97**(2.30)
7.55**(2.29)
Adjusted R2 0.32 0.34 0.34 0.35 0.32 0.30Positive excess loan growth 1.49**
(0.40)1.52**(0.41)
1.54**(0.42)
1.55**(0.43)
1.54**(0.53)
1.56*(0.70)
Liberalizing reform 2-year horizon 3.38(2.43)
3.86(2.32)
4.16(2.26)
4.47*(2.22)
5.40*(2.20)
6.27**(2.24)
Adjusted R2 0.41 0.42 0.41 0.41 0.36 0.31
Source: de Bondt et al. (2014)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Table of Contents
1 Brief history1978-19921993-19981999-2007
2 ReformsNon-tradable sharesIssuance systemImpact assessment
3 Market structure
4 Current market situation
5 Supervision framework
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Stock market structure
Main boards: SSE, SZSE
SME board (2004, SZ)
GEM board (2009, SZ)
OTC market (The third board): existing firms (old) andhigh-tech firms (new)
Strategic emerging industry board (forthcoming, SSE?)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Stock market structure
Main boards: SSE, SZSE
SME board (2004, SZ)
GEM board (2009, SZ)
OTC market (The third board): existing firms (old) andhigh-tech firms (new)
Strategic emerging industry board (forthcoming, SSE?)
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Comparison between main boards and the GEM
IPO Condition main board GEM
business change no in 3 years no in 2 yearsnet asset N.A. 20 mcapital 30 m prior to IPO 30 m after IPOintangible asset
total asset ≤ 20% N.A.profit/income 3-yr profit 30 m; 2-yr profit 10 m (growing),
3-yr NCF 50 m, or 1-year profit 5 m,or OI 300 m OI 50 m,
2-yr OI growth 30%,source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Table of Contents
1 Brief history1978-19921993-19981999-2007
2 ReformsNon-tradable sharesIssuance systemImpact assessment
3 Market structure
4 Current market situation
5 Supervision framework
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Proceeds raised on the A-share market
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
No. of listed companies
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Total market capitalization
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Trading value (line) and volume (bar) of futures
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Table of Contents
1 Brief history1978-19921993-19981999-2007
2 ReformsNon-tradable sharesIssuance systemImpact assessment
3 Market structure
4 Current market situation
5 Supervision framework
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Organizational structure of the State Council
State-owned Assets Supervision and Administration Commission
Special Institutions directly under the State Council (1)
General Administration of Customs
State Administration of Taxation
State Administration for Industry and Commerce
……
Organizations directly under the State Council (19)
Minister of Foreign Affairs
National Development and Reform Commission
Minister of Finance
Minister of Labour and Social Security
Minister of Commerce
People's Bank of China
……
Ministries and Commissions under the State Council(28)
China Banking Regulatory Commission (CBRC)
China Securities Regulatory Commission (CSRC)
China Insurance Regulatory Commission(CIRC)
National Council for Social Security Fund
……
Institutions directly under the State Council (14)
Overseas Chinese Affairs Office of the State Council
Hong Kong and Macao Affairs Office of the State Council
Legislative Affairs Office of the State Council
Research Office of the State Council
Working Organs of the State Council (4)
State Council
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Organizational structure of CSRC
Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework Source: CRSC
Topic 5China’sCapital
Markets I
Zongxin Qian
Brief history
1978-1992
1993-1998
1999-2007
Reforms
Non-tradableshares
Issuance system
Impactassessment
Marketstructure
Currentmarketsituation
Supervisionframework
Source: CRSC
