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What Would Happen If China Open Its Capital Market

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Submitted By amiefu
Words 2384
Pages 10
Introduction
After the financial crisis in 2008, countries all over the world suffered a recession. However, some countries were still doing well and growing. China is definitely one of those countries. China has achieved an average annual growth above 8% in GDP since 2008; which a rarity in today’s economic climate. At the same time China’s capital markets have been in an expansionary mode for years. Both the bond and the stock markets rank 3rd in the world (FAQ: China’s Bond Market), right behind the U.S and Japan. Despite all these achievement, China has yet to exploit its full potential as its financial markets have still not been fully opened yet. In our report, we will make an analysis of what will happen if China opens their capital markets. First, we will introduce the Chinese capital markets, second discuss the current state of the stock and bond markets, then give a description of what should be done before opening the markets and finally conclude our analysis with what will happen after markets open.
China’s capital markets do not have a long history. After the civil war in 1949, mainland China had a stock exchange market called the “Tianjin” Stock exchange market. However, the market was shut down in 1952 because of political acts that targeted capital markets and capitalists. After that date, the capital market remained close until the “opening up” policy set in. At that point, the stock markets reopen in the early 90s (Shanghai Stock Exchange and Shenzhen Stock exchange).
China’s capital markets are comprised of the stock and bond markets, securities investment funds, and futures. The stock market can be divided in 3 categories, the A-shares, B-shares, and the H-shares. The A-shares are the most important stock shares in China’s mainland. It is a RMB denominated shares that is issued by Chinese companies and traded on the Shanghai Stock Exchange and…...

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