Finance reform and opening-up risk well taken
Print Edition
ONCE considered a risk, 40 years on, reform and opening-up in the financial sector has proven to be a risk well taken.
Critical to opening-up, a fresh push in the financial sector is providing opportunities for both domestic and global businesses.
In 1984, Shanghai Feilo Acoustics Co issued 10,000 shares at 50 yuan (US$7.80) per share. It was the first listed firm on the Chinese mainland.
Feilo remained largely unknown outside China until two years later, when a stock certificate of the company was given by Deng Xiaoping, architect of reform and opening-up, as a gift to visiting John Phelan, then chairman of the New York Stock Exchange.
Phelan then made a trip to Shanghai, home to China’s first stock exchange, especially to transfer ownership of the certificate. China’s first stock exchange counter, measuring about 10 square meters, had been open to the public for just two months.
The formative years of China’s equity market accompanied the transformation from a planned economy to a market economy, a journey of many twists and turns.
Perhaps no one knows the early days better than Yang Huaiding, known to many as “Millionaire Yang” for his legendary success back in the 1990s in the fledgling equity market.
Yang, 68, one of New China’s first private investors, was just an ordinary worker with a monthly salary of 51 yuan. He started to invest in stocks after his “first bucket of gold” of 800 yuan through treasury-bond trades.
Yang recalls how he worried that he might be labeled as a “speculator” or a “profiteer.” At that time, laboring with one’s hands was considered one of the few honorable ways to make a living.
Opening-up was not just about borders and trade, it was also about opening up people’s minds. Following the early successes of people like Yang, more people began to invest in the equity market. Today the number of stock-trading accounts in China has exceeded 130 million. That means about one in 10 people have an account.
Of course, the primary function of a stock exchange is not to generate personal wealth. The equity market has opened up new channels for companies to raise funds. More than 3,500 companies are traded on the Shanghai and Shenzhen bourses with a total market value of more than 56 trillion yuan. Likewise, as the market has grown, the regulatory framework has grown along with it.
In building an economy reliant on domestic demand and technological innovation, new rules and mechanisms are emerging all the time.
The country announced a pilot program in March to support domestic listing and issue of China Depositary Receipts. New draft rules on CDRs were put out for public opinion.
Changes to financial markets will bring ample benefits, and are a necessary step for economic transition, said Zhu Min, former deputy managing director of the International Monetary Fund.
With few multinationals willing to miss out on the opportunities the country affords, many are establishing a new presence or expanding their current positions.
J.P. Morgan Chase & Co is the latest to apply to set up a securities firm under rules put in place last month.
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