The China's stock market has experienced a lot of ups and downs in the past decades: from temporary trials to denials, from restoration to full development. In June, 1949, the re-establishment of the Stock Exchange of Tianjin marked the start of the Chinese stock market under communist regime. In 1956, after the completion of the socialist transformation from capitalist industry, the traditional socialist theories and planned economic system began to deny and reject the existence of stock market.

After the Third Plenum of the 11th CPC Central Committee's adoption of reform and opening-up policy in 1978, China restarted its market driven economic reforms and financial market has been part of it.Treasury bonds ware first issued in 1981. In early 1990s, Shanghai and Shenzhen stock exchanges were established. The first stock market was set up in Shanghai in Nov. 26th, 1990. In Dec. 1st, 1991, a second stock market was set up in Shenzhen.

At the same time, the reforms of the corporations have been undergoing rapidly in China. Laws and regulations were established to allow stock-holding companies. The large State Owned Enterprises (SOEs) and financial institutes have been transformed into shareholding companies. China's WTO accession,which brought in unprecedented international competition, has made the reform of China's financial market and corporate governance ever more urgent.

However, apart from the listed companies, the shareholding restructuring of most SOEs is more nominal than real. The state still holds the controlling shares while non-state investors usually have very limited shareholding in most of these companies. As a result, monitoring of the performance of these companies by shareholders has not changed as much as initially expected. Hence, the accountability issue of management remains unsolved and the progress in the corporatization reform is slow.

The motives of the Chinese government to get the SOEs listed in the stock markets are as follows:

• Offering shares to the public and getting listed is a way to change the corporate governance because the public and minority shareholders would bring pressure to bear upon the management of these companies. However, at this stage, China's corporate governance rules are still underdeveloped and the stock markets are still immature. One wonders how realistic it is to expect minority shareholders to enforce accountability onto management. However, in China's socio-political context, the presence of minority shareholders would certainly put more public pressure on the management to improve, and such pressure would help to reform the SOEs at this stage of development.
• Meanwhile, the lack of funds (inadequate equity resulting in high debt-equity ratios), a long-standing problem for China's SOEs, would become more serious in the coming years, as many of them have to upgrade and transform themselves. Giving these companies the opportunity to list will clearly help them to meet such strong demand for funds.

The strong push of the Chinese government to development the stock market for whatever reasons or motives certainly has got well paid. The growth of China's stock market in the last 16 years has largely cached up the 100-years development of a mature market economy, like UK or USA. Analysts say that the past decade experienced the most intensive and extensive reforms in the history of China's securities market, resulting in an improved regulatory system and a market-oriented appraisal system for initial public offering (IPO) as well as expanded capital supply to the market. The history of the rapid development of China's securities market is really impressive, but it is still a newly developed market. So there is a long way ahead for this market to be mature and stable.

During the process of the mainland China's stock market development, the impact of the foreign capital markets, especially the Hong Kong market, to the mainland China has been very critical. Since 1994, many Chinese companies have also been listed in Hong Kong as "H" shares. Some companies have listed in NY, NASDAQ and other foreign markets. This integration of the financial activities in various levels between China and the rest of world has provided the badly needed guidance and experience to China.

As a result of China's economic growth and its security market reformation, the stock market of China has witnessed a robust growth since 2005. By the end of 2007, the A share market traded on the Shanghai and Shenzhen Stock Exchange is ranked number 4 worldwide in terms of total market capitalization (RMB 32.7 Trillion), after the US, Japan and British markets.