Research On The Issues, Causes And Future Direction Of China’s B-share Market

The establishment of the B-share market in1992 is a result of the economic situation at home and abroad together. Seeing the background from abroad, with the advancement of economic integration and financial globalization, the international capital flows among countries in the present characteristics of fast speed, large scale, diversification of the situation, and China urgently needs a capital market opening to the world to attract international capital into the country. Seeing from the domestic background, the establishment of B-share market conforms to the trend of China’s economic reform and opening up. With the rapid development of the domestic economy and further deepening of reform, the foreign capital needed for our country is gradually expanding. Facing the background of deficiencies in China’s foreign exchange reserves and capital project having not yet fully open to the outside, in order to raise foreign investment for domestic enterprises into the country and also open up a channel for international capital, B-share market will established naturally. At the early age, working as a new force in the capital market, B-share market doesn’t only solve the problem of shortage of foreign exchange in china,but also provides a strong financial support for the domestic economic development. In addition, B-share market also offers a new road for domestic enterprises and domestic securities to enter into the international stage, thus gradually narrowing the gap between China’s capital markets and the world’s capital markets. However, since the market positioning and system defects of the B-share at the early age, it is gradually deviating from the original aim in the process of the development, besides, coupled with domestic capital market openness deepening, the basic function of the B-share market has been lost, and it has no reason to exist.Faced with financing loss of function, lack of price discovery function, weak capital allocation function in the B-share market, finding the root of its problem and seeking a way to survive for the B-share market is the current point. This paper reviews the background of the establishment and history contributions of the B-share market, focusing on analyzing the problems faced by B-share market from the basic functions and seeking deep-seated reasons for this result. After the research, the original design defects in the system make the B-share development limited, at the same time, the existence of the irrational investors aggravates the decline of the B-share market. In addition, with the continued expansion of the scale of overseas financing, the introduction of QFII and QDII, the implementation of the foreign direct investment policy, the opening of Shanghai-Hong Kong Stock Connect program and the diversification of foreign investment channels in the latter period, the living space of B-share market is gradually squeezed. In order to solve the dilemma of B-share market, a comprehensive study of five schemes for the reform of the B-share market is made. By analyzing the strengths of each scheme, turning B-share into A-share is the best solution of China’s B share market.