Why China Doesn’t Have A Wall Street

September 14, 2012 in Daily Bulletin, Signature

Since 1992 China’s economy has grown by 1,700%, yet its stock market has declined by 40%. What gives? Carl Walter and Fraser Howie found out:

  • It’s because of the way the stock market is set up. Only state-run companies are allowed on the market, and the Chinese government must have at least 51% ownership of the company.
  • When a Chinese company first sells shares on the market, the Chinese government sets the share price, and then forces other state sponsored enterprises to buy shares at that price – guaranteeing a successful sale.
  • If Steve Jobs were to start a company in China its valuation would not be driven by how visionary his ideas were, rather, it would depend entirely on his relationship with the Chinese government.
  • While the Chinese government could change the way it does things, it won’t, because that would require the introduction of private property and the Communist Party of China would rather that everything just belong to them.

Read more about the largest IPO in history, the veneer of a modern economy, and more over here.

Source: Foreign Policy