Policy Analysis On The Problem Of Solving Equity Segmentation In The Stock Market Of China

This thesis is making a trial discussion on the problem of solving the equity segmentation in Chinese stock market, i. e. on the development of the overall liquidity policy. The share is short for the share certificate, being a kind of valuable securities issued for collecting capital to shareholders as a voucher of shareholding and a means by which divindend and bonus are gained. Equity segmentation means a market system and structure formed due to special historical reasons and special development Chinese stock market characterized in existence "shares of two different characters" (non-circulating shares and society circulating shares) for listed companies in the Chinese A share market and the consequence of "different prices and rights for the same share" . In the period of the late 80' s and the early 90' s, at the starting stage of the Chinese stock market, the stock market was only an "experiment" which had a particular expression in that the state-owned shares constituted great proportion that did and does not circulate in the secondary market to avoid draining of the state-owned assets. This is the historical origin of the problem of equity segmentation in the Chinese stock market. The equity segmentation leads to difficult improvement of management structure, impossible optimization of resources distribution, losing the function of reasonable evaluation of share prices, and obstructing the process internationalization of the stock market. In February and June of the 1999 year, the management departments put out successively several experimental schemes with the aim of solving the equity segmentation, but all they caused a slump in shares prices and had to stop execution successively. The basic reason of their fail consists in the yielding of the Government to pressure from the strong interest groups and ignoring "organization channel" in working out policies, and it was inevitable to pay a severe penalty! In the following years theequity segmentation has called a general attention of the society initiating a wide discussion on this respect. Several thousand schemes have been put forwarded, and these schemes can be classified as follows: equity segmentation structure regulation type, creation new market type, new share total, circulating type, lower price ration type and certification type. These schemes are more or less imperfect, violating the principles of feasibility, stability-adjustability, and system integrity for schemes and plans. Besides, the policy environment also comprises a big obstacle. The new policy thinking of the government departments on this problem embodies the modes of policy formulation: proceeding in an orderly way, "crossing the river by feel ing the stones" , specifically, first "procedure" , and then "entity" , macroscopically determining the principles, and microscopically determining schemes. It embodies combining courage and wisdom. After solving the problem of equity segmentation, in the frame of Chinese capital market will take place tremendous changes and will promote the economic reform in other regions.