Market liberalization within a country

Qian Sun, Hin Sang Tong, Yuxing Yan

Research output: Journal article publicationJournal articleAcademic researchpeer-review

24 Citations (Scopus)


China's B-share market, which used to be restricted to foreign investors, was partially opened up in February 2001 to Chinese local investors. We take this as a controlled experiment in cross-border trading on a small scale. We find mild but positive effects on the B-share market, with higher volumes, lower levels of volatility, lower bid-ask spreads and more liquidity after liberalization. Between A- and B-shares, price disparities narrowed; the correlation and the co-integration relationships became stronger; and the flow of information became more balanced. More new individual investors entered into the B-share market without crowding out existing institutional investors. Even though the liberalization measure is partial and one-way, it has helped to improve the quality of the B-share market, and our results lend no support to the popular claim that liberalization does nothing but help the existing foreign shareholders to cash out.
Original languageEnglish
Pages (from-to)18-41
Number of pages24
JournalJournal of Empirical Finance
Issue number1
Publication statusPublished - 1 Jan 2009


  • China
  • Cross-market trading
  • Market quality
  • Market segmentation
  • Partial liberalization

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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