China B-shares Market Research

The China's B share market was launched at the end of 1991, in order to attract foreign investments and hard currencies. Varied from A shares, B shares are issued to foreign residents and settled in U.S. dollars on the Shanghai Exchange or in Hong Kong dollars on the Shenzhen Exchange. As a matter of fact, the establishment of China's B share market is intended to fill the requirement of reform and development of China's capital market.Although Chinese economy as well as China's capital market have experienced rapid growth in the past a few years and the A share market becomes to play a more and more important role in the overall economic system, unfortunately, the B share market got into a distressed situation gradually. Along with the evacuation of foreign investors, the B share market not only fell behind the expectation of the Regulation, but also can not kept the development pace with the A share market, even the H share market. In the aspect of raising money, the B share market almost lost its financing function entirely. Statistics shows that the overall amount gathered from B share market in the past 15 years is US$5.3 billion that is smaller than the IPO of China Unicom in 2000. Furthermore, the more severe deficiency of B share market lies in the market performance and the quality of listed companies. In the long run, B share companies were with low quality and the index of B share market could not shake off from the distressed situation, which not only deviate the China's macro economy, but also crush the confidence of investors.Therefore, this dissertation is dedicated to studying the issues on the B share market, trying to discover the hidden problems and institutional defects that cause the dilemma of B share market. As well, through detailed and delicate study, we are going to put forward measures to solve the dilemma and make some contribution to the sustainable development of China's capital market.Under the consideration above, this dissertation tries to develop a systematic research framework from the view of stock market's fundamental functions, and draws a conclusion that the dilemma B share market fell into is a malfunction dilemma. In former studies, scholars always focus on some specific aspects of B share market and obviously neglect to study the issues in the perspective of the market in a whole. Here, through careful analysis and deduction, we interpret the dilemma B share market experiencing is not caused by any single reason, but by the overallmalfunction of the market's fundamental functions, which refer to function of financing, function of resource allocation and function of value-added investment, and we find that the malfunction of B share market is not reversible.Based on the research outcome above, the dissertation then studies the special features of B share market and proves that the B share market is no longer worth being maintained as a single stock market and B share market should be closed.In the last part of the dissertation, we discuss various possible measures to close the B share market and put forward an innovative solution that is with great feasibility and is a mixture of Trust Institution and QFII Policy. Via this solution, the malfunction dilemma of B share market can be solved and B share companies can be merged into the A share market. Therefore, this solution can make significant contribution to the sustainable development of China's capital market.