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Viewing report
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Developing Short-Selling on the Mainland Chinese Equity Markets. Edition No. 1
VDM Publishing House, March 2008, Pages: 52
Short-selling is not currently permitted on the mainland Chinese stock exchanges,
but is allowed in most other major stock markets. We review the theory and evidence
on liquidity, price discovery and market efficiency associated with securities lending
and short-selling. The evidence highlights a number of benefits and also risks
associated with these practices. We describe the approaches taken by the Hong Kong
and Taiwan stock exchanges to develop short-selling and build on this to generate
ideas for the development of securities lending and short-selling in mainland China.
We argue that a phased program of reform, well-implemented, can help build
confidence in the mainland Chinese equity markets, by aiding price discovery and
improving market liquidity. This work will be of interest to policy makers, regulators
and investors in the Chinese equity markets.
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