CONFIDENTIAL #
15
collective ownership of productive assets by the society
as a whole. Hence, only a minority proportion of the shares in an enterprise can be offered to the public and, of this proportion, a major part is reserved for other enterprises and collectives, with only a small amount left for subscription by individuals.
33.
The establishment of a securities (bond) market
in Shenyang in August 1986 and of a stock market in
Shanghai in September 1986 were regarded as break-throughs
in that it was the first time open trading in securities
had been allowed in China. At present, the two capital
markets are still rather thin, partly because the PBOC
imposes strict criteria for the listing of stocks and bonds. In view of the very rapid increase in the amount of capital being raised by issuing stocks, the State
Council announced in late 1985 that all new issues of
stocks and bonds would have to be approved by the PBOC. Regulations restricting the right of redemption and the
interest and dividend yields have also been introduced.
These regulations demonstrate that the Chinese authorities
are well aware of the fact that the quality of the stocks and bonds issued must be satisfactory. They also
demonstrate that the PBOC is being careful not to allow
these financial instruments either to have an undue
influence on the level of interest rates or to frustrate
the deposit-taking business of the banking sector.
34.
But the increasingly widespread use of stocks and bonds by enterprises in China as a means of raising
investment funds may not be altogether healthy under present circumstances. This relatively new form of direct
financing outside the banking sector is partly a result of
the shortcomings of the banking sector as a financial
intermediary between savers and investors for meeting the
CONFIDENTIAL #B
No comments yet.
Private notes are available after approval.