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THE EVOLUTION OF CHINESE FINANCIAL STRUCTURE IN THE FUTURE

Historical Data

Generally, Chinese finance has become increasingly marketized over time. This tendency has been accelerating since the reform of equity division in February 2007. This assertion is based on the following three changes in financial/economic data:

1. Rise in the ratio of financial assets (F) to GDP (G), F:G.

2. Rise in the ratio of market value of shares (S) (excluding debentures) to GDP,S:G.

3. Rise in the weight of market value of shares (excluding debentures) in total financial assets, S:F.

The Rise

Of F/G Table 1.11 shows the fluctuation of F/G since 1990. The ratio was 2.13 in 1990, when total financial assets were CNY 3,973.2 billion and GDP was CNY 1,866.8 billion. The ratio was 2 .51 in 2000 and 2.90 in 2010, indicating a tendency of constant rise (see Figure 1.3).

The Rise Of S/G

Despite little fluctuation before the equity division reform began in May 2005, the value of S/G has increased considerably since the reform in early 2007, along with reform in financial structure, gradual rise in F/G, and rapid expansion of financial assets (see Table 1.12 and Figure 1.4).

TABLE 1.11 Fluctuation of F/G Since 1990

Year

Value of Total Financial Assets (CNY in billions) (F)

GDP (CNY in billions) (G)

F/G

1990

3,973.2

1,866.78

2.13

1991

4,276.6

2,178.15

1.96

1992

5,417.1

2,692.35

2.01

1993

7,438.6

3,533.39

2.11

1994

9,656.8

4,819.79

2.00

1995

12,198.7

6,079.37

2.01

1996

15,109.0

7,117.66

2.12

1997

18,572.9

7,897.30

2.35

1998

19,763.1

8,440.23

2.34

1999

22,664.5

8,967.71

2.53

2000

24,951.0

9,921.46

2.51

2001

23,176.1

10,965.52

2.11

2002

20,114.9

12,033.27

1.67

2003

27,808.6

13,582.28

2.05

2004

32,047.8

15,987.83

2.00

2005

36,135.1

18,493.74

1.95

2006

49,031.7

21,631.44

2.27

2007

83,353.6

26,581.03

3.14

2008

72,646.3

31,404.54

2.31

2009

100,025.8

34,050.69

2.94

2010

116,232.3

40,120.20

2.90

Data Source: National Bureau of Statistics of China and State Administration of Foreign Exchange (adapted).

Fluctuation of F/G Since 1990

FIGURE 1.3 Fluctuation of F/G Since 1990

As one of the major indices of assets liquidity, S/F is a symbol of the influence of the capital market on economic activities, and the capacity of resources stock to be reorganized. It also represents the marketization level of wealth management, and serves as the key indicator of room for development in the securities industry.

The Fluctuation Of S/F

Formulated as the ratio of the securitized financial assets to the total financial assets, S/F represents the fluidity of financial assets and the capacity of risk allocation. See Table 1.13 for the fluctuation of the weight of the market value of share in the total financial assets (excluding the debentures) (S/F) since 1990.

Fluctuation of S/G Since 1990

FIGURE 1.4 Fluctuation of S/G Since 1990

TABLE 1.12 Fluctuation of S/G Since 1990

Year

Market Value of Shares (CNY in billions)

Liquid Total Volume (L) Volume (T)

GDP (CNY in billions) (G)

S/G in a Narrow Sense (%) (L)/(G)

S/G in a Broad Sense (%) (T)/(G)

1990

1,866.78

1991

10.9

2,178.15

0.50

1992

104.8

2,692.35

3.89

1993

86.2

353.101

3,533.39

2.44

9.99

1994

96.9

369.062

4,819.79

2.01

7.66

1995

93.794

347.4

6,079.37

1.54

5.71

1996

286.703

984.237

7,117.66

4.03

13.83

1997

520.443

1,752.923

7,897.30

6.59

22.20

1998

574.559

1,950.564

8,440.23

6.81

23.11

1999

821.397

2,647.117

8,967.71

9.16

29.52

2000

1,608.752

4,809.094

9,921.46

16.21

48.47

2001

1,446.316

4,352.219

10,965.52

13.19

39.69

2002

1,248.455

3,832.912

12,033.27

10.38

31.85

2003

1,317.852

4,245.772

13,582.28

9.70

31.26

2004

1,168.864

3,705.557

15,987.83

7.31

23.18

2005

1,063.051

3,243.028

18,493.74

5.75

17.54

2006

2,500.364

8,940.389

21,631.44

11.56

41.33

2007

9,306.435

32,714.089

26,581.03

35.01

123.07

2008

4,521.39

12,136.644

31,404.54

14.40

38.65

2009

15,125.865

24,393.912

34,050.69

44.42

71.64

2010

19,311.041

26,542.259

40,120.20

48.13

66.16

Note: S/G in a "narrow sense" refers to the ratio of the liquid/tradable market value of shares to GDP, and S/G in a "broad sense" refers to the total liquid market value of shares to GDP. As Chinese shares become increasingly tradable, the two ratios tend to converge.

Source: National Bureau of Statistics of China, China Securities Regulatory Commission.

TABLE 1.13 The Fluctuation of S/F Since 1990

Market Value of Shares (CNY in billions)

S/F

Year

Tradable/liquid Volume (1)

Total Volume

(2)

Financial Assets (CNY in billions) (3)

In a Narrow Sense (%) d)/(3)

In a Broad

Sense (%) (2)/(3)

1990

3,973.2

1991

10.90

4,276.6

0.25

1992

104.80

5,417.1

1.93

1993

86.20

353.10

7,438.6

1.16

4.75

1994

96.90

369.06

9,656.8

1.00

3.82

1995

93.79

347.40

12,198.7

0.77

2.85

1996

286.70

984.24

15,109.0

1.90

6.51

1997

520.44

1,752.92

18,572.9

2.80

9.44

1998

574.56

1,950.56

19,763.1

2.91

9.87

1999

821.40

2,647.12

22,664.5

3.62

11.68

2000

1,608.75

4,809.09

24,951.0

6.45

19.27

2001

1,446.32

4,352.22

23,176.1

6.24

18.78

2002

1,248.46

3,832.91

20,114.9

6.21

19.06

2003

1,317.85

4,245.77

27,808.6

4.74

15.27

2004

1,168.86

3,705.56

32,047.8

3.65

11.56

2005

1,063.05

3,243.03

36,135.1

2.94

8.97

2006

2,500.36

8,940.39

49,031.7

5.10

18.23

2007

9,306.44

32,714.09

83,353.6

11.17

39.25

2008

4,521.39

12,136.64

72,646.3

6.22

16.71

2009

15,125.87

24,393.91

100,025.8

15.12

24.39

2010

19,311.04

26,542.26

116,232.3

16.61

22.84

Source: National Bureau of Statistics of China, State Administration of Foreign Exchange and China Securities Regulatory Commission (adapted).

Generally, the value of S/F has been rising continuously. This illustrates the rise in the marketization level of financial markets and the emergence of the role of capital markets as the cornerstone of the Chinese financial system.

 
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