With its securities market continuing to internationalise and grow in complexity, China appears at a turning point in its application of CG and ESG principles. The time is right to strengthen communication and understanding between domestic and foreign market participants.

Introduction: Bridging the gap

The story of modern corporate governance in China is closely connected to the rapid evolution of its capital markets following the opening to the outside world in 1978. The 1980s brought the first issuance of shares by state-owned enterprises (SOEs) and a lively over-the-counter market. National stock markets were relaunched in Shanghai and Shenzhen in 1990 to 1991, while new guidance on the corporatisation and listing of SOEs was issued in 1992. The first overseas listing of a state enterprise came in October 1992 in New York, followed by the first SOE listing in Hong Kong in 1993. Corporate governance reform gained momentum in the late 1990s, but it was less a byproduct of the Asian Financial Crisis than a need to strengthen the governance of SOEs listing abroad. The early 2000s then brought a series of major reforms on independent directors, quarterly reporting and board governance aimed squarely at domestically listed firms.

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