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The Preliminary Phase of Chinese Securities Companies—1987 to 1995

If we take the inceptions of Shanghai and Shenzhen stock exchanges as the symbolic nodes, this phase could be divided into two obvious secondary phases:

1. The infancy phase—1987 to 1990

2. The quick startup phase—1990 to 1995

The Infancy Phase—1987 to 1990

The initial issuance of Treasury bonds by the Ministry of Finance in 1981 marked the beginning of new developments of the Chinese securities market in a new age. This was followed by the government and corporate world raising money by issuing government bonds and corporate bonds and stocks. Shanghai Feilo Acoustics Co. Ltd. debuted with China's first corporate stocks in November 1984. In January 1985, Shanghai Yanzhong Industrials Co. Ltd. was incepted to become the first collectively owned company in China, openly issuing stocks and raising all money through stocks. September 1985 saw the approval of China's first professional securities company—Shenzhen Securities, Inc.—by the People's Bank of China (PBC). The Jing'an Trust of the Industrial and Commercial Bank of Shanghai established a dedicated securities division on September 26,1986, to represent two stocks: Feilo Acoustics and Yanzhong Industrials.

As the scales of financing vehicles such as bonds and stocks expanded, the necessity to set up specialized securities firms became apparent. Shenzhen Securities, Inc., was therefore established in 1987 to officially engage in over-the-counter (OTC) trading of stocks in the city. More than 20 provinces, autonomous regions, and special municipalities followed suit to establish their own securities firms. The three major firms in Shanghai at that time were Shenyin Securities, Wanguo Securities, and Haitong Securities. Most securities firms were founded by the regional branches of the People's Bank of China to issue stocks, manage and represent securities transactions and other securities services, and perform issuance of government bonds and bonds of regional joint-stock companies. Regional finance authorities also established their own securities firms, such as Shanghai Finance Securities and Harbin Finance Securities, mainly to manage government bonds. These securities firms played a boosting role for the initial development of the securities market, forming the infancy of the securities industry. Apart from these specialized securities institutions, securities divisions were established by trust and investment companies and by general banks to conduct securities business. This was in addition to the government bonds management unit set up by the finance departments.

In regard to system development, the State Council of China published the Interim Regulations for Corporate Bonds Management in March 1987. This was the first ever document that provided specific rules for the issuance, management, and legal accountabilities of corporate bonds. It became the basic legal reference for the issuance of corporate bonds in China. The municipal government of Shanghai launched the Interim Regulations of Shanghai for Stocks in May of the same year, which was also the first legal document for the management of stocks issuance. From 1981 through 1987, values of all securities issued nationwide totaled CNY 100 billion. This was a period of varying natures of securities firms, fast-growing numbers, small-scale companies, and limited business scope narrowed down to the represented transactions of small volumes and types of OTC stocks.

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