Stock Market, Financial Governance and China’s Innovation
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AbstractHow to develop a financial system that effectively supports innovation and real sector economic growth has been a key challenge facing China’s financial reforms. This chapter examines the role of stock market and financial governance in China’s national innovation system. Within less than three decades, China’s stock markets have grown rapidly from a negligible size to become one of the world’s largest markets. However, consistent with the general pattern of developing economies, China’s financial system remains overall bank-based. Stock markets have been instrumental in facilitating China’s state-owned enterprise reforms and the rise of China’s ‘national champion’ corporate groups which are a key pillar of China’s R&D (research and development) expenditures. However, stock markets have only played a limited role in directly financing China’s investment in innovation. Moreover, China’s stock market development has been embedded in a hybrid financial governance regime, characterized by substantial tensions among state control, market innovation and stability maintenance. The recent launch of the Science and Technology Innovation Board (STAR) is a new milestone in the development of China’s stock markets. It represents a major effort of China’s reformers to generate new institutional and policy solutions to better finance China’s innovation drive. However, further reforms to strengthen regulatory governance are needed to balance innovation and stability in the process of stock market development.
All Author(s) ListLi Chen
Journal nameHong Kong International Finance Review
Issue Number1
PublisherHong Kong Institution for International Finance
Pages45 - 59
LanguagesEnglish-United States

Last updated on 2021-20-10 at 10:18