Introduction

China’s capital markets, particularly the stock market, have been widely criticized by both Chinese and foreign investors for years. While China’s economy has achieved over 9 percent annual growth rates for the past 10 years, China’s stock market does not reflect that growth. Shanghai Stock Exchange Composite Index (SHCOMP), the main indicator of China’s stock market, shows no great difference between 2002 and 2012. From 2007 to 2012, China’s Gross Domestic Product (GDP) more than doubled, while SHCOMP in 2012 was only about one-third of that in 2007. On the other hand, some people say that China’s capital markets have only taken about 20 years to finish the journey that took Western markets more than 100 years. How should we look ...

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