IMF Working Papers

The Internationalization of China’s Equity Markets

By Juan J. Cortina, Maria Soledad Martinez Peria, Sergio L. Schmukler, Jasmine Xiao

February 10, 2023

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Juan J. Cortina, Maria Soledad Martinez Peria, Sergio L. Schmukler, and Jasmine Xiao. The Internationalization of China’s Equity Markets, (USA: International Monetary Fund, 2023) accessed November 9, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

China’s equity markets internationalization process started in the early 2000s but accelerated after 2012, when Chinese firms’ shares listed in Shanghai and Shenzhen gradually became available to international investors. This paper studies the effects of the post-2012 internationalization events by comparing the evolution of equity financing and investment activities for: (i) domestic listed firms relative to firms that already had access to international investors and (ii) domestic listed firms that were directly connected to international markets relative to those that were not. The paper finds large increases in financial and investment activities for domestic listed and for connected firms, with significant aggregate effects. The evidence also suggests the rise in firms’ equity issuances was primarily and initially financed by domestic investors. International investors’ portfolio holdings in Chinese equity markets and ownership in firms increased markedly only once Chinese firms’ locally issued shares became part of the MSCI Emerging Markets Index.

Keywords: Equity financing, Equity market liberalization, Firm investment, Foreign investors, International investors, Issuance activity, Stock Connect

Publication Details

  • Pages:

    62

  • Volume:

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  • DOI:

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  • Issue:

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  • Series:

    Working Paper No. 2023/026

  • Stock No:

    WPIEA2023026

  • ISBN:

    9798400233876

  • ISSN:

    1018-5941