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Chinas Stock Market: A Marriage of Capitalism and Socialism [ From:Wong, Sonia M L.Cato Journal26.3 (Fall 2006): 389-424. ] Abstract (summary) Chinas stock market had three unique features that made its rapid development unique and interesting.First, the government used it largely as a fundraising vehicle for funding state-owned enterprises (SOEs).Second, Chinas stock market developed under a repressed financial regime.Third, Chinas stock market was developed under a weak legal framework that offered shareholders little protection.The author argues that the marriage of socialism and capitalism took place when Chinas poorly regulated stock market was becoming a venue whereby local governments and SOEs issued shares to capture economic rents created by financial repression, and traders bought and sold shares based on speculative motives rather than investment value. The success of the central governments reforms of Chinas stock market will ultimately come down to Beijings ability to gradually overcome the various oppositions and to establish appropriate market-oriented institutions so that the benefits of a well-functioning stock market can be realized.The rise of Chinas stock market during the 1990s was nothing short of breathtaking. For more than 30 years after 1949, China was a centrally planned economy in which virtually all enterprises were state owned or collectively owned.Investments were centrally planned and funded by government fiscal grants as well as by loans from the state-owned monobank system as dictated by the governments central credit plan. On the late 1980s, as part of enterprise reforms that took place during Chinas gradual transition to a markete conomy, local governments in China started experimenting with selling shares of collectively owned enterprises directly to domestic individuals in order to raise equity capital.Curbed trading of enterprise shares soon began and was quickly followed by over-the-counter (OTC) trading in more organized but s