Chinese Securities Companies To Survive The Crisis Study

In the June of 2001, after Shanghai A Share Index reached 2245, the stock market stepped into the period of adjusting. Till 2004, the circulating value depreciated for 1000 billion yuan, at least 100 listed companies' price were lower than their IPO prices, and the market value of 400 shares are less than their net assets. All of these led to the bad effects: firstly, institutional investors lost much and it is very difficult for other companies to collect money; secondly, banks' NPL raise greatly which increased the risk; thirdly, the living condition of many investing banks deteriorated.Due to the downturn of stock market, many problems in China's investment banks exposed. In 2004, the net asset of China's investment banks reached 96 billion yuan, however, the NPL is 48.7 billion. In fact, China's investment banks are facing the biggest crisis in the history. Since Nanfang was trusteed in 2004, about 20 ones have broken or been trusteed. According to the data of China Securities Regulation Commission, the appropriation amount of bail has reached 60 billion, and the trust financing reached 200 billion. Optimistically, it needs about 100 billion to solve this crisis by government's support.Facing this situation, some department has recogniaze the severity and enacted several laws to regulate the investment banks. Now some problem investment banks have been dealt with, but whether we can solve this crisis radically is unknown. Investment banks are the important media in security market, and they are also the key composition of financial system. So it is very meaningful to solve this crisis.This paper casts some light on every aspect of the sectoral crisis of security industry in China since year 2001, including the characteristics, the causes, and the solution of the security-company crisis. First of all, we go through the history of the development of investment banks in some of the typical market economy countries and give a overall review on the development of the security-company crisis in China, based on which we describe the characteristics and influence of the security-company crisis, and look deeply into the mechanism of its formation using different methods such as practical method and theoretical method. Then we come to the solution of the security-company crisis. In that part, we give some comments on the on-going disposal of the over 20 security companies.We put our emphasis upon the analysis on cause and the solution of the security-company crisis. As an experienced insider of the security sector, I hold the opinion that it's institutional causes that lead to the security-company crisis. The paper is consisted of three main sectors. The first sector is chapter 1, indicating that thesecurity-companies are confronted with a severe crisis of survival, reviewing the history of the development of the crisis, and describing the characteristics and the potential damage to the society.The second sector comprises chapter 2, chapter 3, chapter 4 and chapter 5. In this part, a thorough analysis of the survival status of security-companies is made. In the first place, a analytical matrix is introduced, which give us four different areas, that is, the perfect survival status, the disadvantage caused by internal defects, the disadvantage caused by external defects, and the situation where there are both of them.When focusing on the external factors, the matrix assumed fatal institutional defects in the security market, among which the equity division situation accounts for the most. As to the internal factors, the incomplete corporate governance and the imbalance of the ownership of the security-companies are the two main causes. In the last part of Section 2, an empirical analysis is made regarding the illegal operation of the security-companies, which leads us to the theoretical mechanism of the illegal operation of the security-companies when confronted with crisis.In the last section, which includes four chapters, we will discuss the solution of the survival crisis of the security-companies. We firstly review the history of the crisis of the security-companies took place in developed economies before, especially their reaction and solution to the crisis. Based upon the enlightenment of story from precedents and the theoretical analysis of Section 2, an integrated set of solutions is raised. The main components of the solution set include taking protective measures from the government during a transitional period, keeping carrying out the equity division reform, consummating the corporate governance and the structure of the ownership in security-companies, encouraging the emergence of private-owned and foreigner-owned security-companies, completing the government and legislation regulation in security market, and strengthening the internal risk-control institution in the security-companies.