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A Review of China's Financial Markets

Author

Listed:
  • Grace Xing Hu

    (PBC School of Finance, Tsinghua University, Beijing, China)

  • Jiang Wang

    (Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts, USA)

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.

Suggested Citation

  • Grace Xing Hu & Jiang Wang, 2022. "A Review of China's Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 465-507, November.
    • Handle: RePEc:anr:refeco:v:14:y:2022:p:465-507
    DOI: 10.1146/annurev-financial-111620-010537
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    Citations

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    Cited by:

    1. Zhou, Dong-hai & Liu, Xiao-xing, 2023. "Do world stock markets “jump” together? A measure of high-frequency volatility risk spillover networks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    2. Jiang, Christine & Wang, Xianzhen, 2024. "Portfolio pumping and dumping among Chinese mutual fund companies," Journal of Banking & Finance, Elsevier, vol. 162(C).

    More about this item

    Keywords

    asset-backed securities; China; corporate bonds; derivatives; foreign exchange; government bonds; investment management; stocks;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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