CAPITAL FREEDOM IN CHINA AS VIEWED FROM THE EVOLUTION OF THE STOCK MARKET Zhiwu chen Since reforms started in 1978. China has made commendable progress in achieving capital freedom and individual liberty. Prior to 1978, private enterprises with more than eight employees were pro- hibited and there were no capital markets. Private entrepreneurs were labeled"capitalist tails, "and political movements were launched requently to "cut the capitalist tails. For several decades, Chinese citizens could only obtain employment and economic means from government organizations and state-owned enterprises, which strictly limited individual liberty. Today there are more than 10 million pri- vately owned enterprises, making up more than 80 percent of each year's employment growth. As a result of less regulation and more room for entrepreneurship, it is relatively easy to register and start a business. Public equity offering opportunities and bank financing are also increasingly available to private firms as well. Chinese, young and old, can choose among jobs provided by government organizations SOEs, private businesses, and foreign-owned firms. As al free. dom has increased, the rise of the individual and liberty is one of the highlights achieved in Chinas development over the past 35 years There are, however, many challenges ahead to further increases in capital freedom in China. These challenges are inevitably due to ato Journal, Vol. 33, No. 3(Fall 2013). Copyright Cato Institute. All rights Chen Zhiwu is Professor of finance at the Yale school of ma He thanks William Goetzmann for the many conversations on this topic587 Capital Freedom in China as Viewed from the Evolution of the Stock Market Zhiwu Chen Since reforms started in 1978, China has made commendable progress in achieving capital freedom and individual liberty. Prior to 1978, private enterprises with more than eight employees were pro￾hibited and there were no capital markets. Private entrepreneurs were labeled “capitalist tails,” and political movements were launched frequently to “cut the capitalist tails.” For several decades, Chinese citizens could only obtain employment and economic means from government organizations and state-owned enterprises, which strictly limited individual liberty. Today there are more than 10 million pri￾vately owned enterprises, making up more than 80 percent of each year’s employment growth. As a result of less regulation and more room for entrepreneurship, it is relatively easy to register and start a business. Public equity offering opportunities and bank financing are also increasingly available to private firms as well. Chinese, young and old, can choose among jobs provided by government organizations, SOEs, private businesses, and foreign-owned firms. As capital free￾dom has increased, the rise of the individual and liberty is one of the highlights achieved in China’s development over the past 35 years. There are, however, many challenges ahead to further increases in capital freedom in China. These challenges are inevitably due to Cato Journal, Vol. 33, No. 3 (Fall 2013). Copyright © Cato Institute. All rights reserved. Chen Zhiwu is Professor of Finance at the Yale School of Management. He thanks William Goetzmann for the many conversations on this topic. 44795_Ch19_Chen:19016_Cato 8/29/13 11:37 AM Page 587