Capital Markets: The Ideal State Of The Resource Allocation Choice, The Reality Of China

The late 1990s has witnessed rigorous tests and challenges during, the growth of the global capital market. Beginning with the financial crisis in 1997 Southeast Asia, in 1998 Russia and in 2000 Argentina and Venezuela, the instability of the global capital market prevailed over every corner of the world. In April 2000, this violent storm mercilessly swept the United States, together with subsequent fraudulent practices by large companies in 2001 and the'9 11 incident', the capital market in America fell into decay after ten years' 'bull market'. Although the monetary authorities in many dominating industrial countries adopted ease monetary policy rather than the previous tight monetary policy, the loose financing environment did not invigorate the global capital market; on the contrary, there appeared sustained turbulence, due to the gloomy prospect of the entire world's economic health. Up till now, the situation of capital market was still not that optimistic.The capital market in China also encountered greater difficulties than ever after ten years of rapid growth. In October 2000 the disclosure of the inside story of funds arose many arguments on these malpractices in stock market, until the counterfeit of Yin Guangxia was disclosed in August 2001, investors doubted the credibility of listed companies. After 2002, the capital market in China experienced two years of 'bear market', which made many individual investors and institutions vote by foot, the trade volume was so low that broke historical record. Many discussions were raised on the formulation of "decentring of stock market" in Chinese capital markets.It ought to be said that from the foundation of Shanghai and Shenzhen Stock Exchanges in 1990, the capital market of China made substantial remarkable progress in several aspects such as market size and structure. The ten years' growth of Chinese stock market indicates that capital market plays a crucial role in promoting economic growth in China. As former President Jiang Zemin said...