Study Of The Chinese Stock Market, Credit Problems

This thesis, which examines the credit status in China's stockmarket, makes an analysis of the factors leading to the deficiency incredit, which is approached in relation to credit, fictitious capital,and stock market, and then proposes some strategies with regard tothe reconstruction of China's stock market. The word credit, by modern sense, goes beyond the denotationof loaning and borrowing. instead, it incorporates various meaningsand can be regarded as a combination of economics, culture, moralityand law. The question of credit, in essence, is of economy. Stock, as atype of fictitious capital, is created by credit which characterizes thefictitious capital. As the operation of stock market is ensured bycredit, credit plays an all the more important role. Listed companies,in contrast with other market bodies, have better access toinformation and the advantages of being a trustee. The credit of stockmarket, therefore, is largely determined by that of listed companies. As China's stock market were ushered in primarily by thegovernment and suffered deficiency in credit, the market, in largermeasure, rely heavily on the government's institutional arrangements.The reliance basically finds expression in executive mechanism takesplace of market mechanism, and state credit in place of market credit.The deficiency in credit in China's stock market, being the No.1problem confronting China's stock market, is attributable to theflaws existing both in China's formal and informal constraints. Thereconstruction of China's stock market order, undoubtedly, deservestop priority. Contents of the thesis: The whole thesis , not including introduction, consists of sevensections. Introduction: The purpose and meaning of the thesis . The basicline of thoughts as well as the methodology. Section One: definition of credit , its history, mechanism, andthe credit theories as advocated by Karl Marx and the other Westernschools of thoughts. On this basis, the author advances interpretationof credit which goes: credit is an economically contractual activitywhich is based on trust and has time interval. Whereas thepsychological trust is the core of credit, property rights is thefoundation; While law is the guarantee of credit, honesty is the moralpillar. The author also maintains that the connotation of credit isopen to extention. Section Two: An examination of the fictitious capital theories asheld by Karl Marx. According to Marx, fictitious capital emerged onthe basis of credit, and is characterized by it. Stock is the fictitious form of the combined capital which iscreated by credit; it represents a higher level of credit. Section Three: The idea that credit is the basis of stock marketis presented. The stock traded on the stock market is a fictitiouscapital which, in contrast with the normal markets such as product,or factor markets, has its own characteristics. The problems ofuncertainty, imperfect information, and moral hazards are all themore serious in stock market. The operation of stock market isguaranteed entirely by credit. The collapse of credit systems wouldlead to the downfall of market . Section Four: the argument is presented that the credit of listedcompanies is the core of stock markets. Also factors leading to thecredit of listed companies are treated. The credit of listed companiesbears direct relevance to the investors' confidence, and hence theprosperity of market. It is the author's belief that the independentproperty rights is the basis of the credit of listed companies; a soundgovernance structure provides an institutional guarantee, and aneffective external supervision is the fire wall, as it were. Section Five: Positive analysis is made of the credit of China'sstock market. By citing examples in large number, the deficiency incredit on the part of the listed companies has proved to be a commonproblem. What's more, some intermediate agencies have degeneratedinto accessories of fraud in listed companies, reducing stock marketto have developed a so—called Deficiency in Credit Syndrom...