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Abstract
While still in its early stages, the growth of capital markets in China will rank as one of the important financial events of the 1990s. The first recognized stock exchange was officially opened in December 1990 in Shanghai, followed in April 1991 by the Shenzhen Stock Exchange. At the end of 1993, the value of equity listed on these two exchanges was about $40 billion, similar in size to the Argentine and Turkish exchanges, and comprising roughly 3 percent of the value of all “emerging markets.” Of the approximately 100 stocks listed on the Shanghai Stock Exchange (SSE), almost 90 percent are A shares (equity shares denominated in yuan and reserved for Chinese residents) and about 10 percent are B shares (equity shares denominated in foreign currency and reserved for foreigners). A shares have so far tended to be much more liquid than B shares. Seven of the most internationally well-known Chinese enterprises (Tsingtao Brewery, Shanghai Petrochemical, Maanshan Steel, and four others)—representing about $3 billion in value-have been listed on the Stock Exchange of Hong Kong (SEHK), and others will be listed later in 1994; shares listed in Hong Kong are known as H shares. In October 1993, a Chinese enterprise was listed on the New York Stock Exchange for the first time. At the same time, over 4,000 Chinese companies are reported to have issued unlisted shares that are informally traded in numerous curb markets in all the major cities. The first mutual fund was recently approved by the People’s Bank of China. While enterprise bonds and equities had been issued and traded since at least the mid-1980s, trading in debt securities—mostly issued by the Central Government and state financial institutions—was officially permitted only after 1986, and promoted by the development of a national OTC market in late 1990. At least three government bonds and 27 enterprise bonds have been listed on the SSE, and futures contracts for government bonds are being actively traded on the exchange.
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