Stock Market Index in China - Dissertation Example

Shanghai exchange will be positioned as China’s New York Stock Exchange (main board) while Shen Zhen exchange will act as China’s NASDAQ devoted to the growth or secondary market.  In essence, China’s securities market is still an immature one with few sophisticated financial instruments such as stock options, interest swaps, commodity futures, financial futures and derivatives.  Government is researching the advanced tools while most local securities firms are still inexperienced.

  Supporting the program to nurture the growth of the stock market is China’s $622 billion securities market and its $900 billion savings, which makes China attractive to foreign investors even at this early stage.     Surprisingly, the economic growth has been achieved against a backdrop of inadequate legal and regulatory infrastructure and barriers that inhibit market entry and competition. However, Chinese government has promised improve legal and regulatory framework in order to meet several economic development goals.

  The problems on bad bank loans and inefficient state-owned companies still intimidate foreign investors but many believe China can make its financial market more attractive by creating a better regulatory environment and more complete market structure.Price liberalization, downsizing state-run industry and making way for a vibrant private sector were the touchstones of China’s efforts to open up its trade and investment arena to the world (Schlotthauer, N., 1999).   To further expand domestic demand, a series of moves were taken in 2003.