Law, Finance, and Financial Regulation in China

Financial market performance: EE-FSU vs. China

	Total Mkt Cap/GDP	Tradeable Mkt Cap/GDP	Turnover ratio
Aggregate EE-FSU	0.2	0.12	25
China	0.4	0.16	68

Administrative Governance as a substitute for legal governance

• Chinese financial development did not happen in a governance vacuum
• Administrative governance substitutes for formal legal governance in transition
• Institutional condition of the administrative governance:
• Regional decentralization
• Quota system (1994-2002) at jump-start stage of securities markets
• Decentralized information collection/revelation process
• Provides incentives for information collection