chinese econ study guide - Sheet1 Chinese Economy To...

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Sheet1 Page 1 Chinese Economy To introduce China securities market structure and investment products and brief about the development history of China's securities market, focusing upon the investment scope of overseas investors in China's securities market. One peculiarity is the fact that most of the shares are controlled by the government, resulting in rather ineffective corporate governance. Thress classes of shares that state and institutional (legal person) and personal. Personal is A-share (RMB) and B-Share(ForEx). And then the only one personal shares are circulating. This is staring from trading of government bonds in late 1980s to identify stock returns. And Two major stock market that are Shanghai and Shenzhen. Since the government deploys oversight as the majority shareholder, the managers of these corporations behave in a way that pays even close attention to the bureaucracy . And then, almost all IPOs are foremer SOEs, the state retains a majority of the equity, not circulating. Another peculiarity is that the market as of now is very thin assess the market, the Chinese securities market tends to have relatively high Price Earnings Ration, which is favored by most investors. However, at the same time, these investments suffer from a great deal of volatility as well. Since very few share of each companies are actually circulating, these shares do not behave in the same way as the publicly traded shares in the western markets. Almost all of the very largest SOEs have been listed. Lastly, the relatively short history of the market and the lack of experience for most listed companies have led to inevitable stock price manipulations and regulatory violations. Government bonds that most held by institutions not traded and corporate bonds are still very little. This is mostly caused by the general lack of financial discipline. Most Chinese corporations are now trying to escape this problem by naming in the Western exchanges in Hong Kong and New York, subjecting themselves to the western standards of accounting and transparency. The NPL problem lead to that the stock and flow problem. The size of NPL is that hard to estimate in the state banks. Some transferred to assests management companies in credit cooperatives. Since too many ¡°zombie firms¡± had been sustained by the issuing of non-performing loans, the Chinese banks suffered a stock of non-performing loans that hinder their performance records. In the other hand, the flow problem refers to the difficulty of putting an end to issuing more non-performing loans. This would require the banks and the managing bankers to begin using commercially sound decisions with their lending decisions. To solve this NPL problem, china instituted AMCs that made china exceptional as compared to other countries. AMCs do sell them to a third party such as foreign investment and asset management companies. Also the debt-equity swaps that AMCs converted the debt into equity stakes in the debtor SOEs. It means reduced leverage ratio of SOEs and sell the equity to buyers. The costs are
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chinese econ study guide - Sheet1 Chinese Economy To...

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