Using Western Law to Improve China's State-owned Enterprises: Of Takeovers and Securities Fraud

Abstract

This article uses the example of takeover and securities fraud to examine why the imported Western style of takeover law or securities regulation cannot be fully enforced. The goal of maintaining the control of a large number of State-owned listed companies appears to be a significant contributing factor, explaining why China cannot fully utilize the benefits of Western law in the establishment of a market-oriented economy. If China wants to compete successfully in a globalized economy, the Chinese Government has to consider seriously the issue whether the Government should withdraw or considerably reduce the ownership in the large number of State-owned listed companies. The establishment of efficient market mechanisms requires corresponding institutional rearrangement.