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Lookup NU author(s): Dr Ding Chen
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Jump-starting securities markets in transition economies has proved difficult because these countries normally lack institutions that support them. However, China seems to be an exception. Since the 1990s, China's stock market has rapidly expanded in the absence of any effective institutions. This article attempts to explain the China puzzle. It first raises a critique of Pistor and Xu, who argued that the quota system played a key role in fostering the Chinese stock market. In contrast, it argues that the Chinese stock market is mainly driven by state guarantees, institutional rent-seeking by state-owned enterprises and investors' speculation in an environment of financial repression. Since some of the driving factors are unique to China, its experience cannot be generalised. More importantly, since a market so expanded is highly inefficient, the Chinese approach should be avoided rather than mimicked by other transition economies.
Author(s): Chen D
Publication type: Article
Publication status: Published
Journal: Journal of Corporate Law Studies
Year: 2013
Volume: 13
Issue: 1
Pages: 151-184
Print publication date: 01/04/2013
ISSN (print): 1473-5970
ISSN (electronic): 1757-8426
Publisher: Hart Publishing Ltd.
URL: http://dx.doi.org/10.5235/14735970.13.1.151
DOI: 10.5235/14735970.13.1.151
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