What role do Chinese financial exchanges play in market control

Chinese financial exchanges play a significant role in market control by acting as intermediaries between the Chinese state, society, and financial markets. These state-owned exchanges shape the infrastructural arrangements of capital markets, facilitating the authorities’ ability to control market outcomes and direct them towards state policies. This system reflects the broader context of China’s authoritarian capitalism, where financialization is actively managed and shaped by the state through these exchanges rather than following a purely neoliberal market paradigm.

More specifically, these exchanges facilitate market regulation and governance functions such as issuance of financial reporting inquiry letters that help restrain major shareholder expropriation and improve market discipline. They also actively contribute to financial market stability and control systemic risks by overseeing the functioning of trading platforms, clearing, and market data provision.

Additionally, government control over firms and financial markets in China, including through shareholdings in listed companies, often affects firm performance and market behavior. This government presence in the market is both a stabilizing and controlling force, as state involvement can hinder or support firm success depending on conditions.

Overall, Chinese financial exchanges are crucial instruments for the state to exert influence and control over capital markets, enabling a financial system that supports the state’s economic and political objectives while managing market risks and governance. ^{1, 2, 3, 4, 5}

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