CAPITAL FREEDOM IN CHINA settlement areas in Shanghai and only foreign-registered company stocks were traded. Trading in Chinese domestic stocks resumed in 940. Figure l shows that the year-by-year numbers of new stocks issued were quite high during the post-1940 period. The prewar Shanghai Chinese Stock Exchange was reopened for trading in September 1943 After the japanese troops withdrew from China at the end of World War II, the Shanghai Chinese Stock Exchange was closed gain in august 1945 and then reopened in September 1946, this time with just 20 stocks listed. The exchange introduced stock futures and allowed arbitrage trading by the end of 1946. The good time however did not last long, as the stock exchanges in Shanghai and Tianjin were once more halted by the Republican government in August 1948. This time the reason was to give the government enough time to reform its monetary system. After that, the Tianjin Stock Exchange was never reopened as the communist troops moved into the city in January 1949. The Shanghai Chinese Stock Exchange resumed operation in March 1949 but was closed in May when the communist troops marched into Shanghai The post-1927 Republican years were therefore punctuated with wars and political-financial crises. As a result, the Chin ese stock market went through rounds of stop-and-go cycles, making it diffi cult to develop any sustainable equity culture or a functioning insti- tutional infrastructure that was stable enough for reliable shareholder protection The People's Republic of China was founded on October 1, 1949 A new economic philosophy of public ownership was to replace centuries-old private ownership. Initially, the PRC reestablished a Tianjin Stock Exchange in 1949 and a Beijing Stock Exchange in 1950, with ten and six stocks traded, respectively. But it was soon con- cluded that the market was too speculative, something that diametri cally contradicted Marxist economic principles. Both stock exchanges were shut down in 1952, and the expropriation of private properti entered its high tide thereafter. By 1958, China was under state own ership, with the private sector making up less than 3 percent of national output Economic reform started in 1978. soon after the end of the disas- trous Cultural Revolution(1966-76). However, until the mid-1980s the focus of the reform efforts was on the agricultural sector, allow ing peasant families to each have a plot of land to grow grain and595 Capital Freedom in China settlement areas in Shanghai and only foreign-registered company stocks were traded. Trading in Chinese domestic stocks resumed in 1940. Figure 1 shows that the year-by-year numbers of new stocks issued were quite high during the post-1940 period. The prewar Shanghai Chinese Stock Exchange was reopened for trading in September 1943. After the Japanese troops withdrew from China at the end of World War II, the Shanghai Chinese Stock Exchange was closed again in August 1945 and then reopened in September 1946, this time with just 20 stocks listed. The exchange introduced stock futures and allowed arbitrage trading by the end of 1946. The good time however did not last long, as the stock exchanges in Shanghai and Tianjin were once more halted by the Republican government in August 1948. This time the reason was to give the government enough time to reform its monetary system. After that, the Tianjin Stock Exchange was never reopened as the communist troops moved into the city in January 1949. The Shanghai Chinese Stock Exchange resumed operation in March 1949 but was closed in May when the communist troops marched into Shanghai. The post-1927 Republican years were therefore punctuated with wars and political-financial crises. As a result, the Chinese stock market went through rounds of stop-and-go cycles, making it diffi￾cult to develop any sustainable equity culture or a functioning insti￾tutional infrastructure that was stable enough for reliable shareholder protection. The People’s Republic of China was founded on October 1, 1949. A new economic philosophy of public ownership was to replace centuries-old private ownership. Initially, the PRC reestablished a Tianjin Stock Exchange in 1949 and a Beijing Stock Exchange in 1950, with ten and six stocks traded, respectively. But it was soon con￾cluded that the market was too speculative, something that diametri￾cally contradicted Marxist economic principles. Both stock exchanges were shut down in 1952, and the expropriation of private properties entered its high tide thereafter. By 1958, China was under state own￾ership, with the private sector making up less than 3 percent of national output. Economic reform started in 1978, soon after the end of the disas￾trous Cultural Revolution (1966–76). However, until the mid-1980s the focus of the reform efforts was on the agricultural sector, allow￾ing peasant families to each have a plot of land to grow grain and 44795_Ch19_Chen:19016_Cato 8/29/13 11:37 AM Page 595