China's Capital Market: Access To Control And Market Performance

In the recent ten years the capital market of China has been developing very fast. And the theory on the development of capital market began to be prosperous . But it is in need of the all-romuL systemic and deep research on the development of capital market of China.In order to analyse the regulation on the enterprises' entry into capital market the author chooses the theme capital market of China: the regulaion on the entry and the market effects . China's regulation is special because in most countries the emphasis of regulation is put on the operation of capital market and the financial organizitions' entry into capital market. The enterprises of China can not enter the capital market freely . The main goal of the regulation is to provide more fund for the State-Ownership Enterprises (SOEs) and support them to reform . After this goal was determined the government establish particular organizations and control the procedures of enterprises into capital market. Through a lot of pratical materials the author finds that the goals announced by the regulater don' t come true and the efficiency of capital market of China is very low . Then the author puts up a theory of "capital allocation" which means that the regulator tries to let SOEs get more capital from the capital market through the regulation . The constructure of this article is as follows:The first part of the article is the introduction .The second part introduces several theories on market regulation . The author introduces the theory of public interest and economic theory of regulation including capture theory of regulation and life-cycle theory, and pionts out the defects of these theories . Because of the mechanism of market system of politics social idealogy consumer conciousness and law of China different from those of Western countries the above theories can not be applied to China absolutely . The author maintains that we must make the research on capital market according to the reality of China . Certainly, we can draw some useful lessons from these theories .In the third part we test the effect of capital market ofChina ,especially the influence of entry regulation on the efficiency of capital market. But the regulator do not achieve the goals , such as promoting the reform of SOEs the adjustment of industry constructure and protecting the investors , and the improper regulation has done damage to the efficiency of capital allocation .Then we talk about the mechanism of regulation .We analyse the measures of regulation and procedures which enterprises going into capital market must obay . Then we discuss the implication of the measures and procedures .In the fifth part we try to find the causes of the entry regulation and summarize the main content of the theory "capital allocation". In this part we put the emphasis on the three main goals of regulation : supporting the reform of SOEs improve the efficiency of resource allocation and protecting the investors . But the three goals are contradictory with each other . It is the three goals that determine the establishment and operation of regulation organization , the measures and charactenistics of regulation, and the effect of regulation .In the sixth part of the article the author enlarges the analysis of "capital allocation". In order to make a more meaning conclusion we should consider the special economic background of China and carry out a danymic general equilibrium analysis . The outhor believe that the capital market may be helpful to the reform of SOEs in theory . But we should not put much expectation on this function of capital market . The regulator should give more opportunities to private enterprises .A brief conclusion is summarized in the end of the paper .