State control and the weak stock market in China

Abstract

Purpose

The paper aims to explore how the undue state control leads to the weak stock market in China. It analyzes how the undue state control is exerted in some key areas in the Chinese stock market. This paper intends to expand the existing literature in the relationships among law, politics, and economy.

Design/methodology/approach

This paper mainly adopts the exploratory method to analyze the undue state influences. Under some circumstances, comparative study and historical explanation are also adopted.

Findings

The paper suggests that to create a strong stock market and facilitate the development of the listed companies and the whole economy, the state should first release its control on the stock market.

Research limitations/implications

Various fields are contained in a stock market, in most of which the undue state control can be observed. In this paper, only some key ones are explored. Further research on other fields and if possible more first‐hand data are necessary.

Practical implications

This paper not only offers an answer to concerns on the various misconducts in the inefficient Chinese stock market and helps to realize the possible ways out of such dilemma, but also it offers implications for other emerging economies.

Originality/value

The on‐going debate on the role of common‐law versus civil‐law system in the capital market may have ignored the state involvement. This paper indicates that it is the undue state control rather than the legal system that leads to the weak stock market in China.

Citation

Cai, W. (2010), "State control and the weak stock market in China", Journal of Financial Crime, Vol. 17 No. 2, pp. 179-194. https://doi.org/10.1108/13590791011033881