Financial Market of China: Capital Allocation and Challenges Faced

Running head: FINANCIAL MARKET OF CHINA
Financial market of China
Name of the student
Name of the university
Author note

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FINANCIAL MARKET OF CHINA
Table of Contents
Executive summary....................................................................................................................2
Background of the financial market...........................................................................................2
Capital allocation in domestic economy....................................................................................4
Capital allocation within international economy.......................................................................5
Challenges faced by China due to industrialization and trade policies .....................................8
Conclusion................................................................................................................................10

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FINANCIAL MARKET OF CHINA
Executive summary
The report states how the financial markets allocate capital within the domestic economy. It
also states how the financial markets does its capital allocation within the international
markets. As finance is considered the life blood for the engine of growth for the international
trade and development. In this paper the emerging economy of china is critically evaluated.
The first part of the report states about the background of the financial markets. It states how
the financial markets are important for the emerging economies. The second part of the paper
shows how the capital is allocated within the domestic economy as well as within the
international economy. The next part of the paper shows how the emerging economies are
evaluated. It also states the challenges which China faces as a result of huge industrialization
along with the trade policies. In this part it states what kind of challenges does china graces as
a result of massive industrialization and trade policies. In the background of the financial
markets it is shown that the financial markets are of two types. The financial markets of
China have also been discussed in the report.
Background of the financial market
The financial market is a kind of market where people can trade the financial
securities like futures at a very low transaction costs. The financial markets refers to those
markets which are usually used for raising finance. The financial markets always create a
regulated system for the companies in order to achieve a huge amount of capital. Since the
financial markets are public, they open a transparent way for setting the prices for trading
everything. The financial markets are used for raising finance in the long term which are
known as the capital markets and for short term finance, through the money markets (Costich,
Scutchfield and Ingram 2015). The capital markets consists of the stock markets and the bond

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FINANCIAL MARKET OF CHINA
markets there are also presence of the money markets, future markets, cryptocurrencies,
commodity markets and future markets. The stock market is a series of exchanges where the
corporations which are successful go to raise huge amount of cash in order to expand.
However the mutual funds provides the ability for buying a huge amount of stocks at once.
With the help of bond markets, organizations can obtain huge amount of bonds. When the
price of stock goes up, the bond prices will be going down. The commodities market is a
place where the organizations can offset their future risks while selling or buying the natural
resources. One of the significant function of the financial market is opening and regulating
the various systems for the organizations in order to get huge amount of capital which will be
done through the stock and the bond markets (Rodríguez-Pose and Wilkie 2016). The
financial markets usually attracts funds from the investors. Without the presence of the
financial market, it would have been difficult for the borrowers to find lenders themselves.
The economy of China is going strong every day. The strong economic system have
also brought a strong inflation around. The market is a place where both the buyers and the
sellers will be exchanging goods and services. The accessibility of the financial markets of
China will be strongly linked to the efficiency and the liquidity. The currency of China is
referred with various kinds of names such as yuan, renminbi, CNY and RMB where Yuan is
known as the primary unit of the currency (Yi and Liu 2015). The central bank of China is
being referred as the People’s Bank of China. The People’s Bank of China will be influencing
the financial markets with various kind of instruments. The financial sector of china is
divided in to three types of segments which comprises of the banking, insurance and the
securities. The China Banking Regulatory Commission, China insurance Regulatory
Commission and the China Securities Regulatory Commission controls and regulates the
segments. It have been seen that most of the trading of the money market of China is done
through the interbank markets. Although most of them takes place in the Shenzhen and