The Political Logic of Securities Regulation in China

This chapter adopts a political approach to explain the philosophy and practice of securities regulation in China in the context of the unique developmental path of the country’s economic and political systems. It argues that securities regulation in China is part of the Chinese government’s political legitimacy management effort. For this reason, government regulation of securities market in China shall not be understood merely as economic regulation. Seen in a broader picture, securities regulation is a government-controlled process to rebuild and maintain political legitimacy of the Chinese state. This explains, in part, the often-conflicting regulatory objectives and self-contradictory regulatory practices in the Chinese securities market. In this endeavor, the paper also borrows some elements from the public interest and public choice theories which offer some powerful explanatory tools for use in the Chinese case.