Hybrid Regulatory Regime and the Role of State in China’s Stock Market Crisis 2014-2015
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AbstractHow to develop and regulate financial markets is a critical issue in the transition of former central planning economies. In the 1980s and 1990s, Leninist institutions and control mechanisms were seen as incompatible with the development of modern financial markets. The mainstream policy approach focused on rapidly launching financial market development by mass privatization programs plus the replacement of existing Communist bureaucracy governance by the Western-style court-cum-regulator model of legal governance. China has followed a different path of stock markets development, with the reforms to jump-start the markets closely guarded by administrative control of the party-state bureaucracy. The legal framework and formal regulatory regime for stock markets have only been gradually established in China as the market development evolves. The institutional hybridization of modern stock market arrangements with China’s own Leninist system of governance has generated unusual features in the policy regime of China’s stock market development. Between 2014 and 2015, China experienced a major round of stock market boom and crash, with profound implications on China’s financial stability and regulatory reforms. This paper examines how the institutional hybridization of Western modern stock market arrangements with Chinese Communist Party’s traditional mechanisms of governance and control has shaped the regulatory incentives, policy initiatives and responses during China’s stock market crisis in 2014-2015. It shows that China’s hybrid regulatory regime is enmeshed in tensions among conflicting institutional logics and policy directions, which lead to policy volatility and policy-induced market volatility. It identifies and analyzes three pathological features in China’s hybrid regulatory regime: 1) multi-tasking principal-agency dilemma; 2) campaign-style enforcement; 3) regulatory arbitrage and corruption.
Acceptance Date07/01/2019
All Author(s) ListChen LI
Name of ConferenceThe 2019 IGLP Scholars Workshop organized by the Institute for Global Law and Policy (IGLP) at Harvard Law School (HLS)
Start Date of Conference06/01/2019
End Date of Conference10/01/2019
Place of ConferenceBangkok
Country/Region of ConferenceThailand
LanguagesEnglish-United States

Last updated on 2020-09-04 at 11:16