Walter Hutchens’ Blog

Are PRC stock markets unimportant? Obscure, surely. But unimportant? PRC stock markets are unimportant in terms of PRC corporate finance, contributing less than 2% of the capital needs of PRC companies last year, according to this report in the China Daily. Carl Walter and Frazier Howie point out that the number of investors is actually marginal, too–not even 10% of the routinely-cited number of “70 million brokerage accounts” in existence in China.

Given that I am trying to make a career of studying PRC stock markets, this might seem disconcerting. But actually their “failure” (if the effort to develop stock markets in the PRC proves in time to be that) would still be a richer intellectual vein than many other topics people have turned into academic careers. I mean, economic impact is not the sole–and often not even a principal–criterion for determining what is a good academic agenda. PRC stock markets could be of marginal economic importance but still be very important in a political or theoretical sense.

Why are stock markets marginal contributors to PRC financing? How does the legal environment contribute to this? Is there likely to be any change? Anytime soon? What would China need to do to make its stock markets work better? What did it do to make them of marginal importance now? Can anything from the PRC experienced be generalized as a principle, as in, “to flourish stock markets require. . . . ?” These questions–not to mention just the task of trying to understand what is going on factually in PRC sec reg and market development–provide plenty to keep me busy for the foreseeable future.