BEIJING -- China entered the brave new world of modern financial wheeling and dealing yesterday by inaugurating a national computerized securities-trading system that allows brokers in six major Chinese cities to efficiently trade some state bonds for the first time.
At a time when many of China's economic reforms of the 1980s are under fire from hard-line socialists, the creation of an electronic, over-the-counter securities market marks a limited breakthrough for proponents of expanding market-oriented elements in China's moribund economy.
By the end of its first day, the new system had handled 14 state treasury-bond sales worth about $740,000, and the market's Western-trained creators were talking publicly, though cautiously, of their hope that it soon would be linked with China's first official stock- and bond-trading floors, which are opening in Shanghai in two weeks and in the Shenzhen Special Economic Zone near Hong Kong later.
There was even a bit of hopeful talk of the day when foreigners might be eager to participate in a well-regulated Chinese securities market. Already, a French company in Hong Kong has gained China's approval to start a closed-end fund to buy Chinese equities, though half of the fund will be invested in Hong Kong, Macao and Taiwan stocks to limit risk.
"The development of a modern, national securities industry is an inevitable part of China's modernization," said Wang Boming, vice president of the Stock Exchange Executive Council, a group of 18 Chinese securities and trust companies that spawned the automated securities trading system.
But, more privately, many of the council's young staff members expressed doubt about the political future of China's securities industry, if only based on the more than two years of hard lobbying required before their system gained government acquiescence.
"From the government's point of view, this isn't real," said Gao Xiqing, the council's general counsel and a Duke University graduate who, like several council professionals, worked on Wall Street before returning to China. "There's still a lot of political resistance, a lot of cross currents that have to be dealt with.
"The government doesn't realize the necessity for the importance of efficiently raising capital through a securities market," he said. "All they want to do is keep the economic situation stable, while everywhere the economy is going off a cliff."
With 60 percent of China's state-run industries losing money and eating up 20 percent of the nation's budget in subsidies, the country's economy is in deep trouble, provoking political paralysis.
But Chinese consumers, cautious in the face of continuing political uncertainty, are rolling in cash. They hold an estimated $135 billion insavings and $30 billion in state bonds that they often were forced to take in lieu of part of their salaries.
Until this year, Chinese bond-holders in most regions of the country have been interested mainly in selling their bonds for cash at trading counters at individual securities firms, even at a loss.
By providing a clearinghouse for price quotes and trades, the fledgling securities-trading system -- modeled after the U.S. NASDAQ system -- is aimed at inducing greater liquidity and more regularity in the Chinese bond market, where trading volume is expected to balloon this year to almost $2 billion.
For now, however, the system will handle only state treasury bonds issued during the last four years, not state enterprise bonds or the limited number of Chinese stocks that have been legally traded.