Financial Management

Introduction

Stock Exchanges are trusted indicator of national economic performance basing on behaviour of countries stock market. Stock Exchanges are used to facilitate trading in securities through privately organized markets (Lee, 2016). The present paper analyses the stock market of China for the three consecutive years 2014, 2015 and 2016. Evaluation will be conducted on the corporate governance of China and its framework along with the effectiveness of its policies on the economy of china and its impact on the international market. The fluctuations of exchange rate of China currency Yuan will be discussed in detail and analyze the volatility for the three consecutive years.

Stock Index Performance of China

Shanghai Stock Exchange in mainland China is China Securities Regulatory Commissions non-profit organization, largest stock exchange of china. At present, the stock exchange of China has 1310 listed companies, 10127 listed securities, and 1354 listed stocks. In the first quarter of 2014 growth rate fell to 7%, lowest annual figure in six years. A shift in monetary easing and fiscal stimulus double the value of stock in middle of 2014. The companies reached strong growth levels with price to earnings ratio has 130, more than twice the reasonable levels. 2014 has been china’s turn to claim the Asia’s top position. Index closed at 3157, up by 54% for the year, after Argentina.

(Trading Economics, 2016)

Corporate Governance of China:

Corporate governance plays a significant role in the growth of the economy and towards the health of the financial markets. Corporate governance refers to the set of rules and policies adopted by the government to manage the companies in the country. The main purpose of the corporate governance is to facilitate effective management that ensures success of the companies. Positive investors’ behaviour also played an important role in improving the corporate governance of china. China’s corporate governance was given a big boost with the merger of OECD and CSRC by increasing the mode of compatibility to conduct business in Chinese market by the foreign corporate companies. Below image represents corporate governance framework of China

(Huang, 2015)
Exchange rate fluctuations in China Market

Exchange rate is one of the important aspects of the economy of the country that determined that amount of revenue the country will earn in terms of imports and exports. Exchange rate is refers to the rate at which a country currency can be exchange with another currency for the purpose of trade transactions. (Cavoli, 2014). Exchange rate volatility has greater impact on the economic growth of the country, exchange rate volatility is the risk related to the uncertainty movements in the exchange rate. Many factors international and national factors contribute to the volatility of the rate, an excessive volatility acts as detrimental to the economic growth of the country.  An exchange rate of a country is closely related to the monetary policy adopted by the country. (Gagnon, 2017). An exchange rate is of three types, floating, fixed and pegged floating. In floating exchange rate, the currency is allowed to freely fluctuate according to the market conditions and other influential factors, Fixed exchange rate means government to maintain a constant , fixed rate against specific currency. And pegged floating exchange rate refers when the rate is periodically adjusted.

Conclusion:

China is one of the fastest growing economies in the worked that has also impacted global economic conditions. Any volatility in the stock exchange of China will have significant repercussions in the global platform. The present paper analysed the financial market of China for three consecutive years. Stock market of china was evaluated for three years detailing on the fluctuations in the market and the reasons and affects on these fluctuations on the economic development of the country along with the impact on economic crisis of the international market.

References

Ahmed Haji, A., (2015) The relationship between corporate governance attributes and firm performance before and after the revised code: Some Malaysian evidence.. International Journal of Commerce and Management, , Volume 8, p. 36.

Brigham, E. a. E. M., (2013) Financial management: Theory & practice.. New Jersey: Cengage Learning

Brigham, E. a. E. M., (2013) Financial management: Theory & practice.. New Jersey: Cengage Learning.

Cavoli, T. a. R. R., (2014) Intervention and Exchange Rate Regime Choice in Asia: Does the US Dollar Still Matter?. Doctoral dissertation, World Scientific Publishing)., Volume 6, p. 56

El Montasser, G. F. J. a. A. N., (2014) Explosive bubbles in the US–China exchange rate? Evidence from right-tailed unit root tests. China Economic Journal, Volume 12, p. 78.