Index A-shares and bank privatization 124, 126 defined 3, 26 domestic investors 4, 26, 216, 270, 271 foreign investors 4, 26, 31, 216, 217, 242, 243, 255 prices 4, 31, 216, 217, 270 71 and Qualified Financial Institutional Investor (QFII) program 5, 31, 36, 216, 218, 242, 255, 272 and SMEB (Small-and-Medium- Enterprise Block) 107 accounting standards 32 acquisitions see M&As (mergers and acquisitions) adjustment rate 184, 185 6 Administration of Stock Investments by Insurance Institutional Investors Tentative Procedures 177 8 Agricultural Bank of China (ABC) in banking sector structure 120, 122 fraud, corruption and scandals 136 non-performing loans (NPLs) 12, 125, 128, 129 Investor (QFII) program 219, 223, 224 reform 302 agricultural insurance 167, 179 Allen, F. 161 aluminium 73, 74 aluminium futures 81, 83, 91 amended laws see laws American depositary receipts (ADRs) 3, 249, 251 2, 254 7, 259, 260 62, 270, 271 American International Group (AIG) 167, 172 Areddy, J. T. 28, 90, 91 Asia-Pacific 221, 222, 223, 224, 250 51, 266 Asian Development Bank (ADB) 10 Asian financial crisis 5, 15, 188 9, 206 asset management companies (AMCs) 12, 13, 128, 129 assets 140, 144, 146, 148, 149 50, 151 3, 167 8, 176, 292 3 auctions 55, 56, 57, 66, 68, 69, 102, 103 auto insurance 165, 171, 174 B-shares accounting standards 32 defined 3, 26 domestic investors 4, 26, 217, 270 foreign investors 4, 26, 31, 216, 242, 243 prices 4, 31, 216, 217, 270 bad debts 11, 57 8, 63 Bai, C. 31 Bai, Y. 278 balanced funds 233, 234 bank counter market 52, 53, 54, 66, 67 8 Bank of China (BOC) in banking sector structure 120, 122 and foreign exchange market 185, 191, 199, 200, 201, 202, 203, 205 6 fraud, corruption and scandals 135, 136 non-performing loans (NPLs) 12, 128, 129, 135 privatization and foreign ownership 125 6 Investor (QFII) program 219, 223, 224 reform 302 Bank of Communications 120 21, 122, 124, 219, 260 327
328 Index Banking Regulation Law 2003 300, 301 2, 303 banking sector bank shares 125, 126 7, 260 credit 1, 120 debts 11, 12, 13 and derivatives 93 financial product innovations 129 31 foreign bank investments 123 4 and foreign exchange market 137, 201 2, 208 foreign ownership 126 7 fraud, corruption and scandals 129, 135, 136 importance 1 2 laws 135, 145, 299 304, 321 lending-deposit ratio 134 5 non-performing loans (NPLs) 11, 12, 13, 127 9, 131 3 privatization 124 6, 127, 128, 135 and real estate industry 131 3 regulatory authority 298 9 regulatory reform 135, 137, 302 and SMEs (small-and-mediumenterprises) 133, 134, 137 structure 11 12, 120 21, 122 3 underground banking system competition 133 5 and WTO accession 12, 121, 123 4 see also Big Four banks; commercial banks; custodian banks; foreign banks; individual banks; People s Bank of China (PBOC); policy banks barrier of entry 311 12 Basle Core Principles for Effective Banking Supervision 301 2 Beijing 96, 108, 109, 111, 112 13 Big Four banks 11, 120, 122, 127 8, 135, 136, 201, 202, 203, 219 see also Agricultural Bank of China (ABC); Bank of China (BOC); China Construction Bank (CCB); Industrial and Commercial Bank of China (ICBC) black market foreign exchange 184, 185, 186 7 bond markets bank counter market 52, 53, 54, 66, 67 8 and credit rating 70 and foreign exchange markets 193, 195 6 future development 63, 65 and futures markets 11 and insurance industry 168, 169 70, 173, 175 6, 177 interbank market 7, 52 3, 55 6, 66 7, 70, 300 156 issue process 9, 69 70 OTC (over-the-counter) market 7, 68 9, 70 prices 68, 69 Investor (QFII) program 9, 10, 69, 218 reform 9 10 regulations 9, 68, 70, 300 repo transactions 7 8, 66, 67 risk 69, 70 and securities investment fund industry 233, 234, 240 size 2, 8 9 and stock exchanges 7, 52, 58 9, 61 3, 64 5, 67 types 51 2, 65 unification 68 9 see also Central Bank bonds; E- bonds (enterprise bonds); F- bonds (financial bonds); government bonds (T-bonds); Panda Bonds; subordinated bonds book-entry government bonds 9, 53, 54 5, 55, 56, 61, 66, 67 8, 69 brokerage firms commission 140, 143, 144, 146, 153 5, 156, 203, 205 and foreign exchange market 203, 205 and futures markets 15, 78, 79, 81, 84, 86, 88 19, 140, 143, 144, 146, 153 5, 156 and Proxy Shares Exchange system 6 7
Index 329 Investor (QFII) program 219 Carlyle Group 127, 172 central bank bonds 51, 52, 53 4, 55 7, 63 Central Banking Law 1995 300 Central Banking Law (amended) 2003 300 301, 303, 304, 321 Chan, Kam C. 3, 18, 20, 88, 89 Chen, C. J. P. 27, 32 Chen, G. 286, 287 Chi, J. 27 Chicago Board of Trade (CBOT) 17, 79, 89, 91 Chicago Mercantile Exchange (CME) 190 91 China (firm) 144, 147 China Agricultural Development Bank 9, 11, 120, 121 China Asset Management Co. 3 4 China Aviation Oil (CAO) 19, 227, 265 6, 268 China Banking Regulatory Commission (CBRC) 137, 299, 300 301, 302, 303, 304 China Beijing Equity Exchange (CBEX) 7, 108, 111, 112 13, 289 China CITIC Bank 120, 122, 130, 150, 151, 203 China Construction Bank (CCB) in banking sector structure 120, 122 frauds, corruption and scandals 135, 136 listing on Hong Kong Stock Exchange 127, 260 non-performing loans (NPLs) 12, 128, 129, 135 privatization and foreign ownership 124 5, 126 Investor (QFII) program 219, 222, 223, 224 reform 302 China Development Bank 9, 11, 57, 63, 120, 121 China Everbright Bank 120, 121, 122, 150, 151, 219 China Export-Import Bank 9, 11, 120, 121 China Foreign Exchange Trade System (CFETS) 188, 189 91, 193, 199 200, 203, 208 9 China Futures Association 86 China Government Securities Depository Trust and Clearing Company 57, 66, 67, 68 China Insurance Regulation Committee 70 China Insurance Regulatory Commission (CIRC) 16, 167, 169 70, 173 4, 176 7, 299, 317, 318 21 China Life Insurance Company 167, 169, 171, 260, 271, 317 China Merchants Bank (CMB) 120, 121, 122, 124, 130, 219 China National Democratic Construction Association (CNDCA) 97 8 China National Offshore Oil Corp. Ltd (CNOOC) 228, 259, 261, 290 China New Technology Venture Investment Company 288 China Pacific 167, 169, 171, 172 China Post Bank 120, 121, 122 China Property Insurance (PICC) 167, 171 China Reinsurance Company 167, 171, 317 China Securities Depository and Clearing Corporation (CSDCC) 219, 220 China Securities Investor Protection Fund Corporation Limited 36 China Securities Regulatory Commission (CSRC) and banking sector 120, 121, 135 and bond markets 10, 58, 59, 70 circulars and guidelines 320 22 and corporate governance 283, 284 5 and cross-listing by China 252 3, 269 and foreign ownership of domestic banks 127 and futures markets 17, 19, 77, 78, 86, 89, 90, 91 and insurance industry 177
330 Index 140, 141, 144 5, 147, 157 8 and M&As (mergers and acquisitions) 279 and Qualified Foreign Institutional Investor (QFII) 217, 218, 221 and risk management 19 and securities investment fund industry 235 and securities sector 305, 310 and Small-and-Medium-Enterprise Block (SMEB) 6, 97 8, 99 and stock markets 4, 29, 35 6, 270 supervisory powers 310 China Technology and Equity Exchange (CTEE) 7, 108 China Zhengzhou Commodity Exchange (CZCE) 84, 87 China Zhengzhou Grain Wholesale Market (CZWGM) 74 5, 84 China s Silicon Valley 7, 96, 108 Cinda 12, 13, 128, 129 Citibank 137, 199, 219, 221, 222 Claessens, S. 285 class-action lawsuits 260, 269 70 clearing banks 219, 220 closed batch auction 102, 103 closed-end funds 3, 231, 232 3, 234 5, 243 4, 245, 246 7 Code of Corporate Governance (CSRC) 283, 284 collaboration 190 91 see also joint ventures collateral repo trading 66 7 commercial bank F-bonds 57 8, 63 Commercial Banking Law 1995 145, 300 301, 302 Commercial Banking Law (amended) 2003 302 4, 321 commercial banks 120 21, 122 4, 217, 218, 302 4, 321 see also individual banks; stateowned commercial banks commodities 73, 90 commodities futures 18, 76 Company Law 1993 283, 284, 311 Company Law (amended) 1999 157, 159, 283, 284 Company Law (revised) 2005 on barrier of entry 311 12 on corporate governance 315 16 on creditors protection 313, 315 on earnings and information disclosure 291 2 on listed company organizational structure 316 on merger and separation 313 on obligation of fidelity and diligence 315 on one person limited liability companies (OPLLCs) 312 13 on shareholders protection 313 15 on social responsibility 316 competition 16, 141, 146, 160 61, 174, 193, 195, 235 consumption 73, 89, 91, 165 controlling shareholders 5, 285 6, 292 convertible bonds 8, 9, 58 9, 60 61, 64 5, 225, 226 7 copper 19, 91 copper futures 18, 78, 81, 83, 88, 91 corn futures 79, 81, 82, 84 corporate bonds 7, 8, 9, 58 63, 65, 69, 70, 176, 225 corporate governance and CEO compensation 287 and cross-listing 252, 260, 266, 268, 270 evolution and development 282 5 and firm performance 286 fraud 286 importance of good governance 282 laws 282 3, 284, 306, 315 16 major aspects 282 potential problems 30, 286 qualifications 306, 315 regulations and rules 283, 284 5, 287 and shareholders decisions 5, 316 and stock market performance 35 and stock market regulatory reform 31 and top management structure 286 7 and tunneling 285 corruption see fraud, corruption and scandals; illegalities; irregularities; money laundering cotton futures 84, 85 coupon bonds 53, 55
Index 331 coupon rates 53, 54, 56, 58, 59, 60, 69, 70 credit, banks 1, 120 credit ratings 58, 70, 290 91 Credit Suisse First Boston 16, 221, 278, 281 creditors protection 313, 315 Crooke, Andrew 278 9 cross-listing class-action lawsuits 260, 269 70 companies listed on national exchanges 249, 250 51 and corporate governance 252, 260, 266, 268, 270 costs 269, 270 defined 249 depositary receipts 249, 251 2, 254 7, 260, 270 frauds, corruption and scandals 227, 260, 265 6, 268 on Hong Kong Stock Exchange by Chinese companies 252, 253 4, 259, 260, 262 4, 265, 266, 267, 268, 269 information disclosure 269 on London Stock Exchange by Chinese companies 253, 254, 266 7, 270 rationale 267 9 shares 249, 251, 252, 258 9, 265, 267, 270 71 on Singapore Stock Exchange by Chinese companies 227, 253, 254, 264 6, 268, 269 on US stock exchanges 249, 250, 254 7, 269 70 by Chinese companies 253, 259, 260 62, 268, 269 currencies see euro; Hong Kong dollar; Japanese yen; RMB; US dollar custodian banks 124, 218 19, 220, 221, 222 4 DaimlerChrysler AG 251 Dalian Commodity Exchange (DCE) 17, 74, 79 81, 82, 91 dealers 203 Decision on Reforming the Institution of the Economy 282, 283 depositary receipts American depositary receipts (ADRs) 3, 249, 251 2, 254 7, 259, 260 62, 270, 271 foreign stocks 249, 251 2, 267 global depositary receipts (GDRs) 249, 271 derivatives 11, 17, 19, 91, 93, 191, 193 destabilization 292 3 Ding, J. P. 187 discount bonds 55 dividend tax 36 domestic investors 4, 16, 26, 78, 105, 216, 270, 271 see also Qualified Domestic Institutional Investor (QDII) program domestic M&As (mergers and acquisitions) 276, 277 8, 280, 281 Dongfang 12, 13, 128, 129 Dongfeng Motor Corporation 288 dual exchange rates 185, 186, 187 E-bonds (enterprise bonds) 51, 52, 58 63, 66, 69 70 earnings requirements and management 27, 278, 285, 291 2 economic growth 73, 120, 129, 165 6, 240, 276 economic reform 282 3 efficiency 88, 89, 92, 276 emerging markets 1, 215, 216, 259 equity, in investment banking industry 144, 145 6, 148, 149, 150, 152, 154 equity-based derivatives 91 equity capital, and cross-listing 267 8 equity exchanges 7, 107 11, 112 13, 114, 289 equity funds 168, 175 6, 287 8, 289 equity issues 259 equity underwriting 156 7 Establishment of Fund Management Companies with Foreign Equity Participation Rules 235 euro 198, 199 200, 201, 207, 209 Euroequity market 259 Euronext 249, 250 Europe 1, 221, 222, 223, 224, 225 exchange markets see foreign exchange market; stock exchanges exchange-traded funds (ETFs) 3 4
332 Index F-bonds (financial bonds) 8, 9, 51, 52, 57 8, 63, 65, 66, 176 financial crises 5, 15, 188 9, 206 financial futures 18, 19, 75, 91 financial product innovations 129 31 Financial Surveillance and Administration Department 167 Firth, M. 286 7 floating exchange rates 17, 187, 189, 197, 199, 201 foreign banks 92 3, 123 4, 126 7, 208, 218 foreign companies 16, 78, 235, 284 foreign currencies 3, 26 see also euro; Hong Kong dollar; Japanese yen; US dollar foreign direct investment (FDI) 195, 216 foreign exchange adjustment center (swap market) 184, 185 6, 188 foreign exchange certificates (FECs) 185 foreign exchange market and Asian financial crisis 188 9, 206 black market 184, 185, 186 7 collaboration 190 91 and currency appreciation 16, 188 and currency devaluation 187 deficiencies 202 7 and derivatives 191, 193 developments 2005 2006 196 202 domestic financial market links 193 5 evolution 1978 1994 183 7 evolution 1994 2004 187 96 floating exchange 187 8 and foreign currencies 195 6, 197, 198, 199 200, 201, 202, 203, 205, 206 7, 209 foreign exchange adjustment center (swap market) 184, 185 6 foreign exchange rate reform 197 8 foreign exchange reserves 188, 195, 196 and futures markets 208 9 and insurance industry 16 interbank market 188, 189 91, 193, 196, 203, 205, 300 laws 300, 302, 304 market makers 137, 190, 199 200, 205 market participants 200, 203 4, 208 offshore RMB markets 17, 191 3, 206 onshore market 189 91, 205 6 OTC (over-the-counter) market 189 90, 191, 198 9, 201 policy suggestions 207 9 prices 184, 201 products 201, 203 Investor (QFII) program 16 17, 195, 199 regulation 183, 189, 203, 208, 300, 302 settlement systems 183 5, 188, 208 technology advancement 200, 205 turnover and market share 182, 183, 189, 191, 192, 203, 204, 205, 206, 208 US bond market links 195 6 and WTO accession 189 Foreign Exchange Stabilization Fund 186 Foreign Exchange Transaction Market 186 foreign insurance companies 12 13, 14, 15, 16, 167, 169, 172, 173 4 foreign-invested venture capital investment enterprises (FIVCIEs) 289 foreign investment 195, 216, 227 9 foreign investors bonds markets 10 futures markets 74, 78 and Growth Enterprise Market (GEM) (Hong Kong) 105 147, 160 61 and regional assets and equity exchanges 111, 112 13 and stock market 4, 26, 31, 36, 93, 216, 217, 242, 243, 255 see also Qualified Financial Institutional Investor (QFII) program foreign stock exchanges 169, 229, 249, 250 52
Index 333 see also Euronext; foreign stock exchanges; Hong Kong Stock Exchange; London Stock Exchange; Luxembourg Stock Exchange; NASDAQ; New York Stock Exchange; Singapore Stock Exchange; US stock exchanges foreign stocks 249, 251 2 forward trading 11, 67, 84, 191 3, 201, 202, 203, 205 6, 208 9 fraud, corruption and scandals banking sector 129, 135, 136 and corporate governance 286 and cross-listing of Chinese firms 227, 260, 265 6, 268 futures markets 11, 19, 75, 81, 91 insurance industry 260 investment banking industry 143, 145, 147 securities sector 322 and Small-and-Medium-Enterprise Block (SMEB) 107 stock market 30 see also illegalities; irregularities; money laundering fuel oil futures 81, 83, 91 Fujian Industrial Bank 120, 121, 122 fund management institutions 15, 217 Fung, Hung-gay 4, 18, 31, 87 8, 108, 119, 128, 140, 156, 159, 161, 192, 292 futures exchanges 77, 78 see also Dalian Commodity Exchange (DCE); Shanghai Futures Exchange (SHFE); Zhengzhou Commodity Exchange (ZCE) futures markets development 11, 17, 18, 74 6 efficiency 88, 89, 92 financial futures 18, 19, 91 foreign exchange market 208 9 foreign investors 74, 78, 92 3 fraud, corruption and scandals 11, 75, 81, 91 government bonds (T-bonds) 18, 19 hedging and risk management 18, 19, 78, 89, 91, 92, 191 and information 18, 87 8, 92 and knowledge 92 new product development 90 91 overseas 17, 78 performance 87 90 prices 18, 88, 89, 90, 91 regulation and rules 18, 19 20, 75, 86, 88 90, 93 regulatory reform 11, 75, 77, 79, 84, 311 trading volume and turnover 73, 74, 75, 76, 77, 79, 80, 81, 82 3, 84, 85 Germany 251, 252 global depositary receipts (GDRs) 249, 271 global equity issues 259 Global Registered Shares (GRSs) 251 2 globalization 16 government bonds (T-bonds) amount issued 51, 52, 53, 54, 55, 56, 61 coupon rates 53, 54, 56, 69 development 53, 142 and futures markets 18, 19 and insurance industry 14, 173, 175, 177 142, 143 issuing 53, 63, 65, 69 market size 8 and non-performing loans (NPLs) 128 primary market 7, 66, 67 Investor (QFII) program 10, 218 secondary market 7, 66, 67 and securities investment fund industry 240 types 9, 53, 54 5, 56 Government Bonds Underwriters Group 55, 56 government intervention 75, 88 90, 128 9 government policies 35 7, 119, 158 9 see also regulatory reform grain futures 17, 74 5, 91 see also corn futures; wheat futures
334 Index Great Wall (Changcheng) 12, 13, 128, 129 Green Shoe provisions 258 9 Growth Enterprise Board (GEB) 6, 98 9, 104 Growth Enterprise Market (GEM) (Hong Kong) 104 6, 253, 263, 264, 265, 269 Guangdong Development Bank 120, 121, 122, 126 7 Guidelines on the Introduction of the Independent Directors System in Listed Companies (CSRC) 283, 384 285 Guotai Junan 7, 144, 149 50, 151, 235, 236 H-shares 3, 26, 31, 124 6, 262, 263, 265, 270, 271 Haitong 142, 145 6, 150, 151 Haw, I. 27, 31 health insurance 14, 171, 173 hedging 18, 78, 89, 91, 92, 191, 206 see also risk; risk management high-tech firms 5 6, 7, 96 8, 253, 260, 289 see also SMEB (Small-and-Medium- Enterprise Block); SMEs (small-and-medium-enterprises) homeowner insurance 165 Hong Kong foreign exchange market 17, 192, 195, 198, 200, 201, 204 M&As (mergers and acquisitions) 279 80 and Qualified Domestic Institutional Investor (QDII) program 229 Investor (QFII) program 195, 221, 223 redchips 26 7 RMB non-deliverable forward (NDF) market 192 Hong Kong dollar 17, 198, 200, 201, 206, 207, 209 Hong Kong Stock Exchange and bank privatization 124 6, 127, 128, 135 credit rating 290 cross-listing by China 252, 253 4, 259, 260, 262 4, 265, 266, 267, 268, 269 Growth Enterprise Market (GEM) 104 6, 253, 263, 264, 265, 269 and insurance industry 169 regulations and rules 263 risk 34 stock prices performance 33 4 see also H-shares; redchips HSBC 172, 199, 201, 219, 221, 222, 223, 224 HUAAN Fund Management 235, 238 Huang, Alan Guoming 4, 140, 156, 159, 161, 292 Huarong 12, 13, 128, 129 Huaxia Bank 120, 121, 124, 136 IAS (international accounting standards) 32 illegalities 301, 302, 304, 306, 307, 310, 314, 319 see also fraud, corruption and scandals; irregularities; money laundering imports 73, 74, 90 91 inbound M&As (mergers and acquisitions) 276, 278 9, 280, 281 India 120, 215 indirect foreign investment 216 Industrial and Commercial Bank of China (ICBC) in banking sector structure 120, 122 frauds, corruption and scandals 136 non-performing loans (NPLs) 12, 125, 128, 129 privatization and foreign ownership 125 6 Investor (QFII) program 219, 223, 224 reform 302 industries 6, 221, 222 4, 225, 267, 279 80 see also banking sector; high-tech firms; insurance industry; investment banking industry; IT industries; oil industries; real estate industry; securities investment fund industry
Index 335 information futures markets 18, 87 8, 92 laws on sharing information 303 Investor (QFII) program 218 and regional assets and equity exchanges 109, 111 and securities investment fund industry 242 and short sales of assets 292 3 information disclosure and corporate governance 283, 284 and cross-listing 269 70 and earnings requirements 292 fraudulent 322 laws 306, 308, 309, 314, 322 price-sensitive 29, 35 securities investment fund industry 237, 239 and SMEB (Small-and-Medium- Enterprise Block) 107 insurance asset management companies 177 insurance industry assets and income 167 8, 176, 177, 178 demand 165 foreign companies 12 13, 14, 15, 16, 167, 169, 172, 173 4 and foreign exchange market 16 fraud, corruption and scandals 260 and government authority and supervision 166 7 and government bonds (T-bonds) 14, 173, 175, 177 growth and size 167 71 investment 168, 169 70, 173, 174, 175 6, 177 8, 195 joint ventures 14, 15, 169, 172, 173 laws 167, 174, 176, 318 21 and medium-size enterprises 178 9 opportunities 173 4 performance 13 14 premiums 165, 167 8, 169, 170 71, 173, 174, 175, 176 products 165, 167 8, 170 71, 172, 173 4, 175, 176, 178, 179 and Qualified Foreign Institutional Investor (QFII) 217 reform 319 20 regulation 167, 169 70, 172, 173, 174, 176, 177 8 regulatory authority 317 18 risks 172, 174 5 and securities investment funds 240 state-owned enterprises 166 7, 173, 174 and stock markets 169, 174, 177, 178, 229 and WTO accession 12 13, 172, 318 Insurance Law 1995 167, 176 Insurance Law (amended) 2002 318 21 Insurance Law (revised) 2005 318 21 Insurance Regulatory Committee 229 insured persons, protection 319 interbank foreign exchange market 188, 189 91, 193, 201, 203, 205 interbank markets bonds 7, 52 3, 55 6, 66 7, 70, 300 foreign exchange 188, 189 91, 193, 196, 201, 203, 205 interest rates 53, 55, 56, 69, 70, 133 4, 177 Interim Measures for the Management of Securities Investment Funds 234, 235, 237 Interim Provisions on the Acquisition of Domestic Enterprise by Foreign Investor 278 International Monetary Fund (IMF) 188, 196 investment banking industry assets 140, 144, 145, 146, 148, 149 50, 151 3 brokerage commission 140, 143, 144, 146, 153 5, 156 concentration 140, 153 7 development from 1987 present 142 50 equity 144, 145 6, 148, 149, 150, 152, 154 fraud, corruption and scandals 143, 145, 147 government policies 15, 158 9 and insurance industry 175 6 joint ventures 147, 160 laws 140, 141, 145, 146 7, 157 8, 159 and Qualified Foreign Institutional Investor (QFII) 217, 218 19
336 Index regulation 140, 141, 143, 144 5, 157 8 size 15, 139 40, 143 4, 145, 147 8, 149 50, 152, 153, 154 top securities firms 140, 149 50, 151, 153, 154 7 and tradable and non-tradable shares 145, 156 7, 158, 159, 161 2 underwriting income 140, 143, 144, 146, 154, 155 7 US 150, 152, 153, 156, 258 9 and WTO accession 140, 141, 146 7, 159 62 see also securities investment fund industry Investment Companies Law 2005 141, 146, 147, 157 investors 36, 105 6, 107, 308 IPOs (initial public offerings) and bank privatization 124 6, 127, 128 and cross-listing 260, 263, 264 earnings management 27 and high-tech firms 97 and insurance industry 169 146, 158 9 laws 27, 98, 308 9, 310 and Qualified Domestic Institutional Investor (QDII) program 229 regulations 98 and securities investment fund industry 231 irregularities 19, 306 7 see also fraud, corruption and scandals; illegalities IT industry 275, 292 Japan bank credit 120 foreign exchange market 192, 198, 199 200, 201, 203, 204 insurance industry 167, 170 Investor (QFII) program 221, 222, 223 stock market capitalization 1 Japanese yen 198, 199 200, 201, 207 Johnson, S. 285 joint ventures corporate governance 284 futures markers 93 insurance industry 14, 15, 169, 172, 173 investment banking industry 147, 160 securities investment fund industry 16, 235, 236 7, 243 Kambil, A. 288 Karolyi, G. A. 31 Ke, B. 88 knowledge 92 Lam, S. 30 Law of Collective Ownership of Industries 1988 282 3 laws banking sector 135, 145, 299 304, 321 corporate governance 282 3, 284, 306, 315 16 and decrees 320 22 earnings and disclosure 291 foreign exchange market 300, 302, 304 futures markets 86, 92 information disclosure and sharing 303, 306, 308, 309, 314, 322 insurance industry 167, 174, 176 investment banking industry 140, 141, 145, 146 7, 157 8, 159 judicial interpretation 322 M&As (mergers and acquisitions) 313 risk management 19, 297 8, 302 securities investment fund industry 235, 237, 239, 242 securities sector 304 5 see also Company Law (revised) 2005; Securities Law (revised) 2005 stock exchange listing 98, 101, 107, 308 and transparency 297, 302, 305 US stock exchanges 260, 268, 269 70 venture capital 289 violation 301, 302, 304, 306, 307, 310, 314, 319 and WTO accession 297 lawsuits 260, 269 70, 314
Index 337 Leung, W. K. 31 Li, L. 31 life insurance 14, 167 8, 171, 172, 173 4, 179 limited companies 311 12, 314, 316 Lin, T. W. 286 listed companies 3, 250 51, 306, 316 see also cross-listing Liu, Hong 70 Liu, Qingfeng 108, 128, 285 loans 128 9, 134, 135, 321 see also bad debts; non-performing loans (NPLs) local government-controlled banks 120, 121, 122 local governments 63, 143 London Stock Exchange 249, 250, 266 7, 270 Lu, Z. 285 Luxembourg Stock Exchange 249, 250 Ma, G. 191, 192, 202, 203 market economy 310 11 market liberalization 16, 42 6, 297 market makers 137, 190, 199 200, 205 M&As (mergers and acquisitions) 111, 112 13, 172, 252, 276 81, 287, 292, 313 M&As (mergers and acquisitions) advisory services 156, 157 Measures for the Management of Securities Investment Funds 234, 235, 237, 321 metal futures 18, 91 see also aluminium futures; copper futures metals 90 91 middle classes 165, 171 2 Ministry of Commerce (Mofcom) 227, 278 9 Ministry of Finance 8, 9, 10, 53, 54, 55, 56 minority shareholders 5, 313 14 Minsheng Bank 120, 121, 123, 124, 130 31 money laundering 300, 321 money market funds 233, 234, 240 money supply 196 Morgan Stanley Composite Index (China) 281 multinational companies 252, 256 mungbean futures 18, 84, 85, 87, 88, 89 90 municipal commercial banks 120, 121, 123, 127 mutual funds see open-end funds N-shares 3, 26, 31 Nanhua Bank 121 NASDAQ American depositary receipts 256, 257 cross-listing by Chinese companies 260, 261 2 and high-tech firms 97 listed companies 249, 250 performance 6, 97, 98, 99, 101 National Development and Reform Commission 10, 58 National People s Congress 299, 305 6 New York Stock Exchange 169, 249, 250, 251 2, 256, 257, 259, 260, 261, 290 Ng, Kun 314 15, 316 Nine Opinions 99 non-collateral repo trading 67 non-deliverable forward (NDF) market 191 3, 206 non-performing loans (NPLs) 12, 13, 125, 126 9, 131 3 non-tradable shares conversion to tradable shares 4, 5, 6, 30 31, 36, 99, 106, 141, 147, 158, 159, 161 2, 229, 278 defined 4, 26, 268 141, 145, 147, 156 7, 158, 159, 161 2 and M&As (mergers and acquisitions) 292 prices 26, 30 regulations and rules 292 and stock market performance 242 offshore RMB markets 17, 191 3, 206 oil 73, 90 oil futures 18, 91 see also fuel oil futures; soybean oil futures oil industries 228
338 Index one person limited liability companies (OPLLCs) 312 13 open batch auction 102, 103 open-end funds 3, 147, 231, 232, 233 4, 235, 244 5 OTC (over-the-counter) market bonds 7, 68 9, 70 depositary receipts 256, 260 derivatives 92 foreign exchange 189 90, 191, 198 9, 201 securities 143 stock markets see Growth Enterprise Board (GEB); Growth Enterprise Market (GEM) (Hong Kong); NASDAQ; Proxy Shares Exchange System; SMEB (Small-and-Medium- Enterprise Block) outbound M&As (mergers and acquisitions) 276, 279 80 see also Qualified Domestic Institutional Investor (QDII) program overseas futures 17, 78 Padgett, C. 27 Panda Bonds 10 paper-face T-bonds 9 pension funds 240 pension insurance 173, 175 People s Bank of China (PBOC) in the banking structure 120, 121, 298 9, 300 301, 302, 303 4 and bond markets 7, 10, 53 8, 66, 68, 70 credit rating 291 and foreign exchange market 183, 189, 190, 191, 197, 199 200, 201, 202, 203, 205, 208, 209, 300 and insurance industry 166 and interbank market 66, 70 and interest rates on bank deposits and loans 177 investment banking industry regulation 143, 145 money supply 196 and Qualified Foreign Institutional Investor (QFII) program 217 People s Construction Bank of China see China Construction Bank (CCB) People s Court 304, 314 People s Insurance Company of China (PICC) 166, 317 People s Supreme Court 322 Ping An 166 7, 169, 171, 172, 175, 176 policy bank F-bonds 9, 57, 63 policy banks 9, 11, 63, 120, 121 see also China Agricultural Development Bank; China Development Bank; China Export-Import Bank Poon, W. P. H. 31 People s Republic of China generally accepted accounting principles (PRC GAAP) 32 prices bonds 68, 69 commodities 73 foreign exchange markets 184, 201 futures markets 18, 88, 89, 90, 91 information disclosure 29, 35 securities investment fund industry 231, 244, 245, 246 7 shares see share prices primary bond market 67, 69 primary securities market 143 private banks 120, 121, 123 private companies 65, 96, 107, 108, 111 private equity funds 287 8, 289 private underground banks 133, 134 privatization 31, 124 6, 127, 128, 135, 277 8, 284, 288 property insurance 14, 168, 171, 173, 174, 178 protection laws 308, 313 15, 319 Provisional Measures for the Administration of Renminbi- Dominated Bonds 10 Provisional Measures on Administration of Domestic Securities Investments of Qualified Foreign Institutional Investors 217, 218 Provisional Measures on the Administration of Insurance Foreign Exchange Capital 229 Provisional Rules for Open-end Funds 235
Index 339 Proxy Shares Exchange System 6 7 Pudong Development Bank 221, 225 qualifications 299, 305, 306, 315, 319 Qualified Domestic Institutional Investor (QDII) program 216, 227 9, 271 Qualified Financial Institutional Investor (QFII) program and A-shares 5, 31, 36, 216, 218, 242, 255, 272 bonds markets 9, 10, 69, 218 capital flows 218 and custodian banks 124, 218 19, 220, 221, 222 4 defined 215 evolution and development 215, 216 and exchange-traded funds (ETFs) 4 and foreign banks 124, 218 and foreign exchange market 16 17, 195, 199 and globalization 16 implementation 217 160 investments 221 7 main features 217 18 regulations 47 50, 217 18, 242 3 and securities investment fund industry 242 3 transaction process 219 21 Qualified Institutional Buyers (QIBs) program (US) 257 quality assurance laws, for listed companies 306 raw materials 73, 74, 90 real estate industry 131 3 redchips 26 7, 263, 265 regional assets and equity exchanges 7, 107 11, 112 13, 114, 289 regulation bond markets 9, 68, 70, 300 foreign exchange market 183, 189, 203, 208, 300, 302 futures markets 18, 19 20, 75, 77, 78, 86, 88 9, 92, 93 insurance industry 167, 169 70 interbank market 66, 70, 300 investment banking industry 140, 141, 143, 144 5, 157 8 regulations and rules bond markets 68, 70, 300 Chinese stock exchanges 27 9, 96, 98, 101, 269 and corporate governance 283, 284 5, 287 E-bonds (enterprise bonds) 58, 59 foreign ownership of domestic banks 127 Hong Kong Stock Exchange 263 insurance industry 172, 173, 174, 176, 177 8 M&As (mergers and acquisitions) 278 9, 281 private equity and venture capital 289 Qualified Domestic Institutional Investor (QDII) program 227, 229 Qualified Financial Institutional Investor (QFII) program 47 50, 217 18, 242 3 and risk management 19 20 securities investment fund industry 234 5, 237, 239, 240 short sales of assets 292 3 Small-and-Medium-Enterprise Block (SMEB) 6, 28 9, 96, 98, 101 2, 104, 107 stock markets 27, 28 9, 96, 98, 101, 270, 278, 308 9 tradable and non-tradable shares 292 US stock exchanges 255, 256, 257, 260 US underwriting 258 9 regulatory authorities 298 9, 304 5, 317 18 see also China Banking Regulatory Commission (CBRC); China Insurance Regulatory Commission (CIRC); China Securities Regulatory Commission (CSRC); People s Bank of China (PBOC); State Council Securities Commission (SCSC) regulatory reform banking sector 135, 137, 302 foreign exchange markets 201 2 futures markets 11, 75, 77, 79, 84, 311
340 Index insurance industry 319 20 stock markets 30 31, 99, 106, 311 reinsurance 318 repurchase transactions 5, 7 8, 35, 66 7 Request for Quote (RFQ) 201 revised laws see laws rights offerings 27 8 risk 34, 69, 70, 172, 174 5, 240 risk management 18 20, 78, 91, 92, 191, 297 8, 302 see also hedging RMB 16 17, 199 200, 202 RMB exchange rate 16, 183 4, 186, 187 8, 197 8, 199 200, 201, 202, 209, 300 RMB forwards 201, 202 RMB non-deliverable forward (NDF) market 191 3, 206 RMB swaps 201, 202 ROE (returns on equity) 27, 28 Ruan, H. 285 6 rubber futures 81, 83 Rules (Provisional Rules for Openend Funds) 235 Rural Credit Cooperatives (RCCs) 120, 121, 123 Sarbanes-Oxley Act 2002 260, 269 70 savings financial product innovations 130 growth 165 and insurance industry 173, 175, 176, 177 lending-deposit ratio 134, 135 Investor (QFII) program 195 and securities investment fund industry 240, 241 scandals see fraud, corruption and scandals; illegalities; irregularities; money laudering second boards see Growth Enterprise Board (GEB); Growth Enterprise Market (GEM) (Hong Kong); Small-and-Medium-Enterprise Block (SMEB) secondary bond markets 55, 56 see also bank counter market; interbank markets: bonds; stock exchanges: bond markets secondary markets 66 8 securities exchange 219, 220 securities investment fund (SIF) industry and bond markets 233, 234, 240 challenges 242 3 development 234 9 foreign ownership 16 fund performance 243 5 fund types 231, 232 5, 243 5, 246 7 joint ventures 16, 235, 236 7, 243 laws 235, 237, 239, 242 Net Asset Value (NAV) 231, 244, 245, 246 7 opportunities 239 41 prices 231, 244, 245, 246 7 regulations 234 5, 237, 239, 240 savings and time deposits 240, 241 size and structure 15 16, 231, 232 4 and stock markets 231, 232, 234, 240, 241, 243 5, 246 7 top companies 238 and WTO accession 235, 239 40 Securities Investment Funds Law 2003 235, 237, 239, 242 Securities Law 1999 140, 141, 146 7, 157, 159, 304 Securities Law (revised) 2005 and banking sector 135 and decrees 321 2 enactment 304, 305 on investors protection 308 on irregularities 306 7 on issuing, listing, registration and settlement procedures 308 9 on market requirement and law incompatibility 310 11 on market supervision 310 on quality of listed companies 306 Securities Registration and Clearing Corporation 217 securities sector civil compensation for fraudulent information disclosure 322 laws 304 5, 321 2 see also Company Law (revised) 2005; Securities Law (revised) 2005 regulatory authority 304 5
Index 341 see also bond markets; investment banking industry; securities investment fund (SIF) industry; stock markets Securities Trading Automated Quotations system (STAQ) 143 separation, companies 313 sesame futures 84 Several Opinions on Furthering Capital Market Reforms and Growth 158 Several Opinions on Promoting the Reform, Opening and Stable Development of the Capital Market 99 Shang, Fu-lin 99 Shanghai Credit Information Services 291 Shanghai Futures Exchange (SHFE) 17, 74, 78, 80, 81, 83, 91 Shanghai Pudong Development Bank 120, 121, 123, 124 Shanghai Stock Exchange and bank privatization 124, 126 and bond market 62 3, 64 5, 67 credit rating 290 financial futures 18, 19, 91 foundation 25 performance 32 5 prices 270 risk 19, 34 5 and securities investment funds 243 5 trading mechanisms 28 Shanghai United Assets and Equity Exchange (SUAEE) 108, 289 share prices A-shares 4, 31, 216, 217, 270 71 abnormal fluctuations 103, 104 B-shares 4, 31, 216, 217, 270 bank shares 125 and cross-listing 217, 252, 270 71 Growth Enterprise Market (GEM) (Hong Kong) 105 H-shares 31, 270 Hong Kong Stock Exchange 34 N-shares 31 non-tradable shares 26 Shanghai Stock Exchange 34 5 Shenzhen Stock Exchange 34 5, 102 3, 104 and short sales of assets 292 3 Small-and-Medium-Enterprise Block (SMEB) 99, 101, 102, 103, 104, 105, 106 and underwriting process in US 258 9 valuation differences 4, 216 17, 270 71 shareholders 5, 285 6, 316, 312, 313 15, 316 shares amounts issued 61 and banking sector 124 7, 135, 260 cross-listing 249, 251, 252, 258 9, 265, 267 prices see share prices Investor (QFII) program 221, 225, 226 7 repurchase 5, 35 types 3, 26 7 see also A-shares; B-shares; H-shares; N-shares; nontradable shares; tradable shares Shenyin 142 3, 144 Shenyin Wanguo 6 7, 15, 144, 149 50, 151 Shenzhen Commercial Bank 121, 123 Shenzhen Development Bank 120, 121, 123, 124 Shenzhen Special Economic Zone Securities Co. Ltd. 142 Shenzhen Stock Exchange and bank privatization 124 and bond markets 62 3, 64 5, 67 convertible bonds 64 5, 67 corporate bonds 62 3, 67 credit rating 290 financial futures 91 foundation 25 performance 32 5 prices 102 3, 104, 270 Proxy Shares Exchange system 6 7 regulations 29, 269 risk 34 5 and securities investment funds 244 5, 246 7 and Small-and-Medium-Enterprise Block (SMEB) comparisons 102 4
342 Index see also Small-and-Medium- Enterprise Block (SMEB) trading mechanisms 28 trading position disclosure 28, 103 Shleifer, A. 285 short sales 19, 292 3 Singapore 8, 9, 192, 204, 221, 224, 225 Singapore Stock Exchange 227, 253, 254, 264 6, 268, 269 Shanghai Petrochemical Company (SINOPEC) 260, 261 Small-and-Medium-Enterprise Block (SMEB) and A-shares 107 described 6, 36 7, 289 development 97 101 Growth Enterprise Market (GEM) (Hong Kong) comparisons 104 6 Implementation Scheme 6, 99, 101 2, 107 information disclosure 107 investors 105 6, 107 laws and regulations 6, 28 9, 96, 98, 101 2, 104, 107 listing requirements 6, 101, 104 5, 107, 289 main board comparisons 102 4 monitoring 107 prices 99, 101, 102, 103, 104, 105, 106 small-and-medium-enterprises (SMEs) cross-listing 253, 260, 266, 269 financing 96 7, 133, 134, 137 see also Growth Enterprise Board (GEB); regional assets and equity exchanges; Small-and- Medium-Enterprise Block (SMEB) and insurance industry 178 9 and regional assets and equity exchanges 289 stock exchange listing 97, 269, 289 underground banking sector 133, 134 and venture capital 288 social responsibility 316 Social Security Fund (SSF) 240 South Korea 1, 8 9, 120, 170, 215 Southern (firm) 144, 147 soy meal futures 79, 82 soybean futures 18, 79, 82, 84, 88, 91 soybean oil futures 79 Special Economic Zones 142 special financial institution bonds (special F-bonds) 9 special purchase government bonds 9 special treatment (ST) 278, 291 spot trading 8, 66, 67, 84, 201 2, 203, 205 Standard Chartered Bank 219, 221, 222, 224, 288 Standing Committee of the National People s Congress 53, 58, 63 State Administration of Foreign Exchange (SAFE) 183, 185, 189, 197, 199, 203, 217, 242 3, 278 9 State Council and bank privatization 128 and banking sector 300 and corporate governance 283, 284 and futures markets 17, 78, 84, 86 and insurance industry 166, 167, 176 157, 158 9 and Small-and-Medium-Enterprise Block (SMEB) 98, 99 and state-owned enterprises (SOEs) 268 and stock market 29, 36 and venture capital 288 State Council Securities Commission (SCSC) 144 5, 304 State Development Bank see China Development Bank state-owned and state-run enterprises and central planning 119 corporate governance development 282 4 cross-listing 259, 260, 265 6, 268, 269 insurance industry 166 7, 173, 174 141 non-tradable shares 26, 30 overseas futures 78 privatization 31, 277 8, 284 and regional assets and equity exchanges 108 10, 111 stock exchange listing 96, 269, 278
Index 343 state-owned commercial banks 63, 119, 301, 302 see also Agricultural Bank of China (ABC); Bank of China (BOC); Big Four banks; China Construction Bank (CCB); Industrial and Commercial Bank of China (ICBC) state-owned enterprise-controlled banks 120, 121, 122, 123 state-owned shares see non-tradable shares State Reserve Bureau (SRB) 19 stock exchanges bond markets 7, 52, 58 9, 61 3, 64 5, 67 and credit ratings 290 91 electronic voting systems 29, 36 140, 143 listed companies 3, 250 51, 278, 306, 316 listing requirements 27, 29, 96, 98, 269, 278, 308 9 regulations and rules 27, 28 9, 96, 98, 101, 270, 278, 308 9 and securities transactions 143 and small-and-medium-enterprises (SMEs) 97, 269, 289 structure 3 4 supervisory powers 310 trading mechanisms 28 see also Euronext; Hong Kong Stock Exchange; London Stock Exchange; Luxembourg Stock Exchange; NASDAQ; New York Stock Exchange; Shanghai Stock Exchange; Shenzhen Stock Exchange; Singapore Stock Exchange; US stock exchanges stock funds 233, 234 stock markets and bank privatization 124 6 capitalization 1, 2, 25, 32 3 and corporate governance 283, 284 5 destabilization 292 3 earnings requirements 278, 291 2 and foreign investors 26, 31, 93 government performance-boosting policies 4 5, 35 7 and insurance industry 169, 174, 177, 178, 229 laws 27, 98, 308 9, 310 lows 98 market liberalization events, 1990 2005 42 6 and mergers and acquisitions (M&As) 278, 280 81 performance 4, 31 5, 242, 280 81 prices 33 4, 102 3, 270 71 and privatization 278 and Qualified Domestic Institutional Investor (QDII) program 229 raising additional capital requirements 27 8 regulatory and policy reversals 30 regulatory reform 30 31, 99, 106, 311 risk 34 scandals 30 and securities investment fund industry 231, 232, 234, 240, 241, 243 5, 246 7 shares see shares strategic cooperation investors 126 7 subordinated bonds 169 70 sugar futures 84 supervision 29, 166 7, 299, 301 2, 310, 317, 318 19 swaps markets 184, 185 6, 201, 202, 203, 208 9 syndicated underwriting 54, 55, 56, 69 Tentative Procedures 177 8 time deposits 240, 241 tradable shares conversion from non-tradable shares 4, 5, 6, 30 31, 36, 99, 106, 141, 147, 158, 159, 161 2, 229, 278 141, 145, 147, 156, 158, 159, 161 2 regulations and rules 292 types 26 trading contracts, interbank market 66 7 trading position disclosure 103 transparency 9 10, 17, 77, 265 6, 270, 284, 297, 302, 305 Treasury bonds see government bonds (T-bonds)
344 Index Tsingtao Brewery 252, 262 tunneling 285 UBS Limited 221, 222 UK 204, 249, 250, 266 7, 270 underground banking sector 133 5 underwriting 140, 143, 144, 146, 154, 155 7, 258 9 Urban Credit Cooperatives (UCCs) 120, 121, 123 US bank credit 120 bond markets 195 6 copper consumption 91 foreign exchange market 195 6, 197, 198, 199 200, 201, 202, 203, 204, 205 foreign stocks 249, 251 2 futures exchanges and markets 17, 18, 78, 88, 191 information disclosure 292 insurance industry 167, 169, 170, 172, 177 investment banking industry 150, 152, 153, 156, 258 9 IT industry 275, 292 private equity funds 288 Investor (QFII) program 221, 222, 223, 224 securities investment fund industry 232 4, 242, 243 stock exchanges see NASDAQ; New York Stock Exchange; US stock exchanges stock market capitalization 1 US dollar 197, 198, 199 200, 201, 202, 203, 205, 206 7, 209 US dollar reserves 195 6, 197 US Securities and Exchange Commission (SEC) 255, 256, 257, 258, 269 US stock exchanges cross-listing 249, 251 2, 253, 254 7, 268, 269, 270, 271 foreign shares 249, 251 laws and regulations 255, 256, 257, 258 9, 260, 268, 269 70 listed companies 249, 250, 252, 255 N-shares 3, 26, 31 see also NASDAQ; New York Stock Exchange venture capital 97, 106, 287, 288 9 Vishny, R. W. 285 voucher government bonds 9, 53, 54, 56, 67, 69 Wang, Chentao 132 3 Wang, H. Holly 88 Wang, X. 202 Wanguo 142, 143, 144 wheat 73, 74, 89 wheat futures 18, 84 6, 87, 88, 89 90 Williams, Jeffrey 17, 87, 89 World Bank 196 WTO accession and banking sector 12, 121, 123 4, 126 and foreign exchange market 189 and futures markets 74, 75, 89, 91 and insurance industry 12 13, 172, 318 140, 141, 146 7, 159 62 and laws 297, 305, 318, 320 and market liberalization 16, 297 and securities investment fund industry 235, 239 40 and transparency 297, 305 Wu, Ding Fu 320 Wuhan Securities Investment Fund 234 Xiang, Junbo 297 8 Xinhua Far East China Credit Ratings 290 Xinhua Life Insurance Co. 172, 176 Xu, Xiaoqing Eleanor 3, 243 5 Yang, S. G. 203 Yangtze River Delta 108 Yao, X. Y. 203 Zheng, D. 140 Zhengzhou Commodity Exchange (ZCE) 17, 74, 80, 84 6, 89, 91 Zhongguancun ( China s Silicon Valley ) 7, 96, 108 Zhou, Zheng Qing 305 6 Zhu, Rong-ji 98 9, 110