COR1306 Course Outline PDF

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SMU Classification: Restricted

COR1306 Capital Markets in China Course Outline 2021/2022 Term 1

A. Instructor and Contact Information WANG Jiwei, PhD, Associate Professor of Accounting (Practice) Room 5025 (Level 5), School of Accountancy Tel: (65) 6828-0616 Singapore Management University Fax: (65) 6828-0600 Singapore 178900 Email: [email protected] Consultation times: By appointment at https://calendly.com/drdataking Section G1 G2 G3

Seminar Time Mon 12pm – 3:15pm Mon 7pm – 10:15pm Tue 8:15am – 11:30am

Venue SOA.SR2.3 / Zoom SOA.SR2.3 / Zoom SOA.SR3.2 / Zoom

For online sessions, you will access the ZOOM link from SMU eLearn system. You are required to keep your camera on at all times. B. Course Prerequisites There are no prerequisites. C. Course Description Since the establishment of two stock exchanges in Shanghai and Shenzhen in early 1990s, China’s capital markets have experienced amazing growth and become one of the largest capital markets in the world. The equity market is the dominant capital market and has been evolving and growing towards a more even mix of investor classes, with institutions such as investment funds, pension funds, insurance companies, investment and trust companies, corporates, sovereign wealth funds and Qualified Foreign Institutional Investors (QFIIs) playing a more prominent role. With the newly introduced Shanghai/Shenzhen-Hong Kong Stock Connect, the inclusion of China A-shares in the MSCI emerging markets index, the Science and Technology Innovation Board, the T+0 trading rules and the market-oriented registration IPO regime, the Chinese equity market is expected to be more open to the international investor community. The bond and derivatives markets are emerging as well and there is huge growth potential in the near future. However, the evolving China's capital markets are characterized with all sorts of problems: severe opportunistic corporate reporting practice which may cause resources misallocation; tight control of the government which may change the rule of the game halfway; inefficient financial intermediaries such as financial analysts and the mass media which may increase information asymmetry; severe financing constraints for all but the largest State Owned Enterprises; under-developed legal and institutional frameworks with insufficient protection to

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

minority shareholders against insider expropriations, the capital flows from shadowing banking system which may increase market volatility, the financial fraud and political corruptions, etc. This course is designed to offer a detailed analysis of China's capital markets, ranging from the overall assessment of the macro-economic environment and political context, to the detailed micro level study of the specific players, instruments, and individual transactions. Through seminars, cases, discussions, and group projects, students explore the opportunities and challenges presented by the quickly evolving capital markets in China. This course is designed for students who are interested in understanding the unique aspects of the capital markets in China. This certainly includes not only those who anticipate some interactions with Chinese companies (in China, Singapore or other part of the world) and Chinese investors later in their careers but also those who want to work in China. Many of the insights gleaned from the course can be readily applied to other emerging markets, thus this can also be a good course for students interested in understanding the functioning of emerging capital markets in general. D. Course Objectives and Skill Developments The objective of the course is to enable students to qualitatively  understand the political and macro-economic context of China’s capital markets;  understand various players, instruments, market segments, and representative transactions on the markets;  understand some of the hot issues that highlight the challenges as well as opportunities facing market participants going forward. This course contributes to the development of the following BAcc learning objectives:  LO2.1 Our students understand and can apply business concepts and principles.  LO2.2 Our students can communicate effectively in a business context.  LO2.3 Our students understand the principles of leadership and team building in a business context.  LO3.1 Our students understand and can apply the ethical principles relevant to accounting professionals. This course also seeks to develop your versatility, individual competencies and awareness of ethics and responsibilities through the various class and assessment activities: 

  

Analytical skills: Analytical skills will be developed through cases and problems, including incomplete data and unstructured question sets. Class activities are also designed to train students’ analytical skills. Communication: Students will be assessed on class participation, individual and group presentation. Team work: Students will be working in a team for their project in this course. In addition, students will be asked to work together in solving cases and problems in class. Active learning: Classes consist of limited formal course materials presentation and the majority of the activities in class are designed for active learning.

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

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Professional ethics: Ethical concepts and constructs are integrated throughout the course.

E. Textbook and Readings Main Readings There is no prescribed textbook. Some chapters from the following books will be discussed in class. Other readings include academic articles, equity research notes, research by consulting firms, business cases, and topical articles. Detailed reading list for each topic will be provided in class. CSRC (2008): China Securities Regulatory Commission (CSRC). 2008. China Capital Markets Development Report. China Financial Publishing House. https://openknowledge.worldbank.org/handle/10986/12643 Mishkin and Eakins (2019): Mishkin, Frederic S. and Eakins, Stanley G. 2019. Financial Markets and Institutions. 9th Edition, Pearson. OECD (2011), Corporate Governance of Listed Companies in China: Self-Assessment by the China Securities Regulatory Commission, OECD Publishing. http://dx.doi.org/10.1787/9789264119208-en Walter and Howie (2006): Walter, C. and Howie, F. 2006. Privatizing China: Inside China’s Stock Markets. 2nd Edition, John Wiley & Sons. eBook available at SMU Library. NOTE: All the above books are either available at the SMU Library or downloadable online for free. Singapore laws as well as SMU policies prohibit unauthorized reproduction of textbooks and other copyrighted materials. As aspiring business and community leaders, students are expected to make the ethical and legitimate choice and acquire only authorized copies of all published materials. F. Assessment To pass the course, a student is required to attempt all the following four components and obtain a total mark of 50% or better. The assessment components are: Class Participation and Activities Progress Assessment Group Project Final Examination Total

10% 20% 30% 40% 100%

Further details of component assessment requirements and criteria will be announced via the detailed course outline to be posted on eLearn. No questions verbatim from past year papers or published test banks will be used for the graded continuous assessments and examinations in the course.

G. Academic Integrity

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

All acts of academic dishonesty (including, but not limited to, plagiarism, cheating, fabrication, facilitation of acts of academic dishonesty by others, unauthorized possession of exam questions, or tampering with the academic work of other students) are serious offences. All work (whether oral or written) submitted for purposes of assessment must be the student’s own work. Penalties for violation of the policy range from zero marks for the component assessment to expulsion, depending on the nature of the offense. When in doubt, students should consult the instructors of the course. Details on the SMU Code of Academic Integrity may be accessed at https://oasis.smu.edu.sg/Pages/DOS-WKLSWC/UCSC.aspx . Copyright Notice Please note that all course materials are meant for personal use only, namely, for the purposes of teaching, studying and research. You are strictly not permitted to make copies of or print additional copies or distribute such copies of the course materials or any parts thereof, for commercial gain or exchange. For the full copyright notice, please visit: https://smu.sg/Copyright-notice or OASIS -> CAMPUS LIFE & EXCHANGE -> CONDUCT & DISCIPLINE -> UNIVERSITY COUNCIL OF STUDENT DISCIPLINE H. Accessibility SMU strives to make learning experiences accessible for all. If you anticipate or experience physical or academic barriers due to disability, please let me know immediately. You are also welcome to contact the university's disability services team if you have questions or concerns about academic provisions: [email protected]. Please be aware that the accessible tables in our seminar room should remain available for students who require them. Emergency Preparedness for Teaching and Learning (EPTL) As part of emergency preparedness, instructors may conduct lessons online via either the Zoom or WebEx platform during the term, to prepare students for online learning. During an actual emergency, students will be notified to access the Zoom or WebEx platform for their online lessons. The class schedule will mirror the current face-to-face class timetable unless otherwise stated. I. Class Etiquette In order to maintain a class environment that is conducive to learning, I suggest the following code of class etiquette: 1. Arrive at class on time and avoid leaving early. 2. Bring a name tent to each class and try to sit in the same location. 3. Turn off cellphones and other audible electronics. 4. Use laptops only when it is necessary. 5. If you feel that another class member is negatively impacting the classroom environment, let me know, and where appropriate, I will anonymously communicate your feedback. 6. For online sessions, always keep your camera on.

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

J. Lesson Plan The course will be conducted in class sessions that will last for 3 hours each with a short break in between. You are expected to come to these sessions prepared and be ready to respond to questions as required. This means doing the required readings and/or homework for each session. PROPOSED LESSON PLAN (May be revised based upon timing):               

Week 1: Introduction to China and Chinese Economy Week 2: Fundamentals of Capital Markets Week 3: Overview of China’s Capital Markets Week 4: Regulatory and Legal Framework Week 5: Restructuring and Listing of State-Owned Enterprises Week 6: IPO in China’s Capital Markets Week 7: Chinese Companies Going Overseas Week 8: Recess Week Week 9: Corporate Governance Week 10: Non-tradable Share Reform and SOE Reform Reloaded Week 11: Corporate Reporting, Insider Trading and Others Week 12: Group Project Presentation Week 13: Group Project Presentation Week 14: Self Revision Week 15: Final Exam

The detailed course work plan will be announced in class. Note that this schedule is subject to change. Alternative times or activities will be arranged should they become necessary. Appendix A: Assessment Details To pass the course, a student is required to attempt all the four assessment components and obtain a total mark of 50% or better. The assessment components are listed below: Class Participation and Activities (10%), Progress Assessments (20%), Group Project (30%) and Final Examination (40%). 1. Class Participation and Activities (10%) You can get participation points by participating or raising questions in class or online via eLearn discussions. Participation points may also be earned from certain out of class activities detailed in class. Furthermore, participation points will be awarded for providing constructive feedback about the course to the instructor in class or via email (suggestions, comments, corrections, etc.). Regarding professionalism, it is expected that you will 1) prudently use electronic devices in class (for instance, for taking notes), and 2) obtain permission from the professor in advance for planned absences. Points will be lost for absences without an approved explanation. The following outlines the rubrics for the assessment of class participation.

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

Mark 90100%

80%

60-70%

10-50%

0%

Comments Outstanding Contributor. This student was well prepared and contributed actively to both in class and outside class discussion/consultation. His/her presence significantly enhanced the learning experience for all students. During online sessions, the student keeps camera on at all times. Good Contributor. This student was well prepared and contributed occasionally to in class discussion, but was an active participant during in class small group learning and outside class consultation. During online sessions, the student keeps camera on at most times. Average contributor. This student attempted the in class exercises and participated, but to a lesser extent and/or of lower quality than outstanding and good contributors. During online sessions, the student keeps camera on for at least half of the class time. Poor contributor. This student did minimal preparation and generally did not actively participate. During online sessions, the student keeps camera on for less than half of the class time. Unsatisfactory contributor. This student was unprepared and/or did not participate. During online sessions, the student keeps camera off at most times.

2. Progress Assessments (20%) There will be one independent study consisting of a written slides and an oral presentation on an assigned topic during the term. For the independent study, reading materials will be assigned to each student. Students are required to study the reading materials, summarize the topic in a PowerPoint slides and moderate a presentation and discussion session in class. A softcopy of PowerPoint slides must be submitted to the professor at least one day before the scheduled presentation time. Students are expected to present a qualitative summary and critique of the assigned materials and quantitative analysis is not required. Students are strongly encouraged to incorporate related research findings and personal comments on the assigned topics. The grading rubrics for independent study will be provided in class. 3. Group Project (30%) The group project aims to provide students with an understanding of a specific topic on capital markets in China. More details on the project will be provided during the term. 4. Final Examination (40%) Further information will be provided as the term progresses. The final examination is a closed-book, of two (2) hours duration and covers the entire course. Important Notice on Date and Time of Final Exam At SMU, the dates and times of all final exams are announced well in advance of each term’s course bidding. Students should note the official date and time of the final exam for this course as published by the Office of Registrar. Requests by students to take the final exam on other than the officially scheduled date and time will not be approved except under extremely extenuating circumstances entirely beyond the student’s control. Students who believe they may be unable to take the final exam on the scheduled date and time should not enrol for this course this term.

COR1306 (Prof Wang Jiwei) Course Outline

SMU Classification: Restricted

Appendix B: Proposed Detailed Seminar Plan Week Topic 1 Course Logistics Topic 1: Introduction to China and Chinese Economy  Chinese History  Chinese Culture  The Belt and Road Initiative

Class Readings TED video

Understanding the rise of China (Martin Jacques) http://www.ted.com/talks/martin_jacques_understanding_the _rise_of_china Chinese Culture https://www.chinahighlights.com/travelguide/culture/

2

Topic 2: Fundamentals of financial markets  Introduction to financial markets  The role of financial markets  Economics of Financial Institutions  Efficient Market Hypothesis  The power of capital markets in China (Using Fosun International as a case discussion)  Challenges to capitalism

Mishkin and Eakins (2019): Ch 2 & 7

How did China succeed? (Joseph Stiglitz) https://www.youtube.com/watch?v=Iaw4n9IZDdc

3

Topic 3: Overview of China’s capital markets  Political system in China  Chinese economy development since 1949  Singapore and China  

CSRC (2008): Ch 1

The origin of China’s capital markets Internationalization of China’s capital markets

The original architect of China’s capital market (Gao Xiqing) https://www.youtube.com/watch?v=fV3OiU4dFuA

Individual Presentations & Discussion 4

Topic 4: Financial system and regulatory framework  Financial institutions in China  The central bank: People’s Bank of China  

Interest rate and capital markets The regulator: China Securities Regulatory Commission (the 810 and 327 Incidents)

COR1306 (Prof Wang Jiwei) Course Outline

Walter & Howie (2006): Ch 3

SMU Classification: Restricted

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Securities Law of China

Biggest challenges to China's capital markets (Charles Li) https://www.youtube.com/watch?v=xpKXfWC_2Jc

Individual Presentations & Discussion 5

Topic 5: Reform of State-Owned Enterprises  SOE in the centrally-planed socialist economy  Define ownership and corporatization  Package SOE for public listing  SOE reform reloaded  State capitalism  Case study: From State to Private (Shuanghui Group)

Walter & Howie (2006): Ch 4 & 5

How China became a superpower: 40 years of economic reform https://www.youtube.com/watch?v=1SBnK9XIlZE&t

Individual Presentations & Discussion 6

Topic 6: IPOs in China’s capital markets  IPO regulation system  IPO pricing system  IPO underwriters  Post-IPO performance

Walter & Howie (2006): Ch 6 Yu and Cheung (2013) Curran (2014)

China IPO Market Has Been Strong: UBS https://www.youtube.com/watch?v=p_cgJ_jLNG4 Individual Presentations & Discussion 7

Topic 7: Chinese Companies Going Overseas  Why go overseas  H shares, S-chips and other overseas listing  The red-chips game including Regulation 10  The VIE structure 

Case: South Beauty

What does China own in the U.S.? | CNBC Explains https://www.youtube.com/watch?v=wsbHS3VtCvM

Individual Presentations & Discussion 8

Recess

COR1306 (Prof Wang Jiwei) Course Outline

PWC (2013) Yap and Qiu (2014)

SMU Classification: Restricted

9

Topic 8: Corporate Governance  Importance of corporate governance  The Chinese corporate governance model  

Board of Directors vs. Board of Supervisors Independent directors in China

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Market for corporate control (Rules of Acquisition) Case: The first Chinese hostile takeover Steps to improve corporate governance The role of Communist Party Committee

OECD (2011)

China SOEs and Corporate Governance Panel Discussion https://www.youtube.com/watch?v=S374aWdyl3A

Individual Presentations & Discussion Topic 9: Non-tradable share and mixed ownership reform  Problems of split-share structure  Converting non-tradable to...