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The Fast-Development Phase of Chinese Securities Companies, 1996 to 2001

Many factors prompted the quick growth of Chinese securities companies in this phase, including the following events. The Decisions of the Communist Party of China (CPC) on Issues Regarding Reforms and Development of State-Owned Companies, passed at the Fourth Plenary Session of the Fifteenth CPC National Congress, laid down the specific arrangements for the strategic adjustments of state-owned economic entities and strategic restructuring of state-owned companies. This provided opportunities for the growth of the Chinese securities industry. The market of restorative value returns, started in early 1996, and the emerging of the "5/19 blowout market" in 1999, marked the turnaround in the development of the Chinese securities market. Following this, the Chinese stock market entered a long-lasting bull market. Securities institutions also entered a phase of regulated development. As regulators sorted out and regulated the business scope, internal control system, outlet distribution, and risk-control conducts of securities companies, they accepted a number of highly effective regulatory measures. Three major features of this fast-growing phase were as follows:

1. Profitability of securities firms enhanced

2. Number of securities companies stabilized

3. Securities regulation system further streamlined

Profitability Of Securities Firms Enhanced

Securities companies saw their business quickly grow and profits turn positive staring in the latter half of 1996, following the improvement of the entire business environment for the securities industry.

By the end of December 2001, the total market value of the stock market increased 342 percent from CNY 984.237 billion at the end of 1996 to CNY 4,352.2 billion. The GDP proportion of the stock market jumped from 7.9 percent at the end of 1994 to around 44.7 percent, and the number of listed companies surged 73.58 percent from 530 at the end of 1996 to 1,160. Bonds issuance also swelled significantly, with government bonds issued hitting CNY 247.6 billion and CNY 389.1 billion in 1997 and 1998, up by 24.71 percent and 57.51 percent, respectively, from the previous year. In late August 1999, the number of investor accounts in the securities market amounted to 42.98 million. By the end of September 1999,15 securities investment funds, totaling CNY 35 billion, were issued.

By the end of 1996, the 96 securities companies nationwide saw their total assets, actualized capitals, investors' trading deposits, self-managed securities, annual securities transactions, and profits reach CNY 159.053 billion, 16.89 billion, 39.12 billion, 19.369 billion, 1,896.52 billion, and 0.462 billion, respectively, shattering the CNY 0.585-billion loss of 1995. In 1997, the most profitable securities company in China, Junan Securities, saw its net profits hit CNY 740 million, while profits of the top 20 earners totaled CNY 5.358 billion. By 2000, the top earner in China, Haitong Securities, reaped CNY 1.521 billion in profits, while the combined profits of the top 20 earners reached approximately CNY 15.4 billion, up by 106 percent and 187percent, respectively.6

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