China’s Share-Structure Reform: An Opportunity to Move Beyond Practical Solutions to Practical Problems

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The “share-structure reform” currently underway in China’s stock market aims to resolve the so-called “split-equity structure,” wherein the Chinese securities regulator prohibits two-thirds of shares technically listed on the market from actually trading. This Note examines the historical roots of the split-equity structure, explains the mechanics of the share-structure reform, and assesses shareholders’ claims that the reform deprives them of their property in violation of the Chinese Constitution. It argues that Deng Xiaoping’s practical and experimental approach to economic development, which continues to shape Chinese domestic economic policy, handicaps the reform. The share-structure reform is a workable solution with short-term benefits, but it lacks the substantive legal framework necessary to instill the level of trust and certainty that is imperative to a well-functioning stock market.