A Review of China's Financial Markets

Grace Xing Hu and Jiang Wang ()
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Grace Xing Hu: PBC School of Finance, Tsinghua University, Beijing, China
Jiang Wang: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA

Annual Review of Financial Economics, 2022, vol. 14, issue 1, 465-507

Abstract: The fast growth of China's economy has brought it not only to the center of the global economy but also to a transition point in its growth model, a transition from scale to efficiency, speed to sustainability, input driven to innovation led. How its financial markets can drive this new growth model and facilitate the transition are pressing challenges, for China and for the world. We provide a comprehensive review of China's financial markets, including government bonds, corporate/credit bonds, stocks, asset-backed securities, financial derivatives, investment management, and currency, focusing on their growth paths, distinct characteristics, and unique opportunities. Despite fast expansion at times, their development is often lagging behind market needs, uneven over time, and unbalanced across markets. This developmental pattern is driven mostly by the government's immediate policy objectives rather than by the markets' ultimate efficiency in serving their key functions, including liquidity provision, price discovery, and risk allocation.

Keywords: asset-backed securities; China; corporate bonds; derivatives; foreign exchange; government bonds; investment management; stocks (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1146/annurev-financial-111620-010537

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