The development of corporate governance in China

Abstract

Over the last decade there have been significant economic reforms in China. Foreign investment is encouraged and there are increasing numbers of joint ventures with foreign partners. The stock exchanges of Shanghai and Shenzen have developed quite rapidly, and the expansion of China's economy and the growing importance of foreign investment has implications for the development of corporate governance structures in China. The internationalization of institutional portfolios ensures that there is a cross‐border interest in corporate governance, and that China's steps in developing corporate governance will be watched with interest. In this paper, we will explore the existing cultural aspects of China, the structure of share ownership in China, recent developments that have taken place in China's capital markets, including the growing foreign influence, and their implications for corporate governance developments. We compare and contrast the influences on corporate governance in the West with those in China. We conclude that any model of corporate governance which develops in China is likely to embody the special role of the state and certain idiosyncratic cultural aspects of China, whilst taking on certain of the characteristics of an Anglo‐Saxon corporate governance model.