The Model Of Financing & Short-Selling And It's Dynamic Equilibrium In China

The financing & short-selling transaction is a kind of mature transaction system in foreign developed security markets. As been proved, it plays a positive role in promoting security market's stability, reducing price fluctuation, pricing and meeting different needs of investment and risk preference. It is an important transaction system to perfect market's mechanism, motivate financial innovation and guide financial resources to flow.As far as Chinese security market is concerned, in one hand the financing activities are controlled strictly by the supervision department, leading to the inefficiency of resources flows between the capital market and the monetary market; in the other hand, the security market is confronted with great systematic risk as it is lack of short-sellers. As a result, it is urgent for our security market to supplement its regulation mechanism.So we can reach a conclusion that the financing & short-selling transaction is not only the need to fit in the international security markets, but also the requirement of Chinese security market itself. Carrying out financing &short-selling transaction is an important way to promote our security market. To research the model of financing & short-selling transaction is full of theoretical and practical significance.Besides preamble and epilogue, this article incorporates four parts.The important function of financing & short-selling system is introduced in the preamble of this article, esp. the practical meaning of establishing this system in China, which is the fundamental reason for research undertaken in this subject.Part 1 is about the basic concepts of margin transaction. In this section, the article introduces the basic identification and influence of financing & short-selling, as well as its basic theories and practices both at home and aboard.Part 2 discusses about the necessity and possibility to establish the financing & short-selling system in China, by combining the current situation in Chinese security market with the theories and the practices mentioned above. By discussing four kinds of mature models of financing & short-selling overseas in the following section, the article argues that since China has an immature security market and a market-oriented object in future, China may learn the experiences from Taiwan and Finland and adopt a transitional model. Then the article discusses in details the model and the operational mechanisms of Chinese financing & short-selling system. This section is the core and the main innovative point of this article.Considering the special roles of both the security companies and the merchant banks in financing & short-selling transaction, the article tries to analyze the dynamic development and equilibrium of the model achieved above as the transaction is developing in two different trends that are in favor of the security companies or in favor of the merchant banks. This section involves another innovative point of this article.Following the forth section, the last chapter reviews the main research and conclusions of the whole article, as well as puts forward the further studies in this subject.