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Department of Financial & Management Studies (DeFiMS)

Finance in China

Course Code:
151030013
Unit value:
0.5
Year of study:
Year 3 of 3 or Year 4 of 4
Taught in:
Term 2
The course introduces students to China’s financial sector, including banking, enterprise financing, stock markets, bond markets, exchange rates and monetary policy. This course is designed to provide students with a fundamental understanding of how China’s financial institutions work, as well as the challenges that integration into the global financial system bring. The topics to be covered include China’s financial market transition, the functioning processes of China’s financial institutions and their evolution, the development of China’s domestic stock markets, monetary policy and the revaluation debate. The course concludes by examining the prospects for integrating international best-practices and standards into China’s financial system.

Objectives and learning outcomes of the course

At the end of this course students should be able to:

  • Understand the financial market implications of the transition from central planning to market economy;
  • Evaluate the main challenges faced by China’s financial sector in making the transition to the market economy, including that of WTO entry;
  • Understand the key features of capital market development in China and discuss the main challenges faced by China in facilitating the future development of its capital market;
  • Discuss the main economic and political arguments on whether or not China’s currency is overvalued or manipulated and evaluate the main option for future exchange rate reforms and their likely impact on the domestic and international economy;
  • Evaluate the prospects of convergence with international practice and assess its implications for China

Method of assessment

This course is assessed by 30% written coursework and 70% by one two hour examination

Suggested reading

Indicative Readings:

  • Lavine, Marie (1999) The Economics of Transition: From Socialist Economy to Market Economy, St. Martin Press: New York
  • McKinnon, R.I. (1991), The Order of Economic Liberalization: Financial Control in the Transition to a Market Economy, London and Baltimore: The John Hopkins University Press
  • Stiglitz, Joseph (1989) ‘Financial Markets and Development’, Oxford Review of Economic Policy, Vol. 5: 55–68
  • Lardy, N. (1998), China’s Unfinished Economic Revolution, Brookings
  • Chai, JCH (1997) China Transition to a Market Economy, Oxford: Clarendon Press
  • Nolan, P. (2004) China at the Cross Roads, Cambridge: Polity Press
  • Lardy, Nicholas R (2002) Integrating China into the Global Economy. Washington DC: Brookings Institution Press
  • Lu, Ding (2006) ‘China’s Banking Sector Meeting the WTO Agenda’, University of Nottingham China Policy Institute, Discussion Paper No. 5 (April)
  • Ma, Guonan (2006) ‘Who Pays China’s bank Restructuring Bill?’, Centre D’Etudes Prospectives et D’Informations Internationales (CEPII), Working Paper No. 2006-04 (February)
  • Green, Stephen (2004) The Development of China’s Stock Market, 1984–2002: Equity Politics and Market Institutions, London: RoutledgeCurzon
  • Chow, Gregory (2007), China’s Economic Transformation, Blackwell Publishing (Chapter 14)
  • Green, Stephen (2005) ‘The privatisation two-step at China’s listed firms’ in Stephen Green and Guy S. Liu (Eds) Exit the Dragon? Privatization and State Control in China, Oxford: Blackwell Publishing
  • Tenev, Stoyan and Chunlin Zhang, with Loup Brefort (2002) Corporate Governance and Enterprise Reform in China: Building the Institutions of Modern Markets, Washington DC: World Bank and the International Finance Corporation
  • Justin Yifu Lin, Fang Cai and Zhou Li (2003) The China Miracle, section ‘Exchange Rate Policy Reform’ of Chapter 5 ‘Economic Reform in China’
  • Jeffrey Sachs and Wing Thye Woo (2001) ‘Structural Factors in China’s Economic Reform’, in Garnaut and Huang: Growth without Miracles
  • Gary Hufbauer, Yee Wong and Ketki Sheth (2006) ‘The Revaluation Debate’, US-China Trade Disputes: Rising Tide, Rising Stakes
  • Pagano, M, AA Roell and J Zechner (2002) ‘The Geography of Equity Listing: Why do Companies List Abroad?’, Journal of Finance 57 (6)
  • Sun, Laixiang and Damian Tobin (2005) ‘International Listing as a Mechanism of Commitment to More Credible Corporate Governance Practices: Case of the Bank of China (Hong Kong)’, Corporate Governance: An International Review (Blackwell Publishing), vol. 13, no. 1 (January)
  • Tobin, D. and S. Singh (2008) International Best Practices, Domestic Constraints and International Listing: Evidence from China’s State Banking Sector, Journal of Chinese Economic and Business Studies