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UPDATED: November 29, 2010 NO. 48 DECEMBER 2, 2010
Moving the Securities Market Forward

It's been 20 years since the first transaction on the Shanghai Stock Exchange on December 19, 1990. During the past two decades, China's securities market has accomplished what developed countries have spent nearly 100 years trying to achieve; that is, establishing a large and orderly market. The number of listings on China's two stock exchanges in Shanghai and Shenzhen has increased from eight to more than 2,000 and their combined market capitalization has grown from 1.21 billion yuan ($181.95 million) to 25 trillion yuan ($3.76 trillion), making China's securities market the second largest in the world, after the U.S. market.

To show the country's resolve in reforming and opening up, the creation of China's securities market was done quickly, or perhaps a bit too quickly, taking less than one year from the time the decision was made to establish the market to the actual opening of the Shanghai Stock Exchange. But for what it has experienced and achieved in the past two decades, China's securities market has changed the economy and society much more than expected.

In the past 20 years, the securities market has made the Chinese economy more market oriented. It has played an important role in promoting the transformation of the Chinese economy from a state-dominated one to a diverse economy with state-owned, private and foreign participants.

Before 1990, China had no capital awareness, capital market or capital operation mechanism, and enterprises could only rely on state allocations or bank loans. But today, Chinese people have become fully aware of the role of capital, and there are now nearly 100 million individual and institutional stock investors in China. Capital operation mechanisms have been established, where the market plays an increasingly important role in financing and resources allocation and the capital's influence is already great.

The development has also accelerated the construction of China's modern corporate governance system and nurtured a large number of entrepreneurs, financiers and venture capitalists with international visions as well as accounting, legal and evaluation firms that serve the capital market. They contribute significantly to China's economic growth.

To meet securities market requirements, the Chinese Government has formulated many laws and regulations that conform to international practices, helping the Chinese economy to become better incorporated into the international economic system.

China's reform and opening-up policy started at the end of the 1970s, but the fast economic growth has only happened within the past 20 years—after the securities market was established.

China's securities market is still young, with many challenges ahead. For example, protection of investors' legitimate rights and interests is not effective enough, and malpractice, such as falsifying information, insider trading and price fixing, occurs often.

But we cannot let these shortfalls undermine the value and prospects of China's securities market. In the next 20 years, we should focus on establishing China's securities market as a global capital operation platform. China's securities market will be larger and more mature by then, and the Chinese economy as a whole will also be more open.

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