Vanderbilt Journal of Transnational Law

First Page



The stock market which currently exists in the People's Republic of China (PRC) is a product of the "open door policy" introduced by Deng Xiaoping in 1978, following the death of Mao Zedong, to promote economic development over class struggle. Following limited experimentation with stock issuance at the local level, the Shanghai and Shenzhen stock exchanges opened in 1990 and 1991 respectively. Since its recent inception, China's stock market--which comprises the trading of domestically owned A-Shares and foreign-owned B-Shares--has experienced impressive growth together with periods of volatility as well as lackluster performance. Recent performance of A-Share trading has been strong, while B-Share trading has been riddled with problems due to the lack of enforcement of the "foreign ownership only" rule. In February of 1997, the death of Deng Xiaoping, the architect of China's current socialist market economy, surprisingly did not cause any significant downturn in the stock market

This Note first offers a brief history of the recent re-emergence of the stock market in China, which has thrived several other times in China's long history. Second, the author questions the Chinese market's future viability as an internationally competitive stock market. In determining what the future holds for China's stock market, the author first examines the PRC's commitment to resolving the ideological "counter-socialist dilemma" presented by the introduction of capitalist reforms into China's socialist economy. Although Chinese leaders disagree as to how to resolve the counter-socialist dilemma, they are committed to resolving it The Note suggests that in order to truly realize the re-emergence of its stock market, the PRC must enact and enforce a national securities law and repeal its policy of censoring all foreign news and financial information entering the country. Until such steps are taken, the author concludes that China's stock market will remain an inefficient and highly risky emerging market.