The corporate governance law of China accepts only two forms of corporations, namely; public corporation and closely held corporation. The two categories havefurther divisions in structures as well. The economic effects of the corporate governance in China are an interesting analysis of the good and bad effects on the law on the economy of China.
The corporate governance of China has certain loopholes that need to be fixed in order to implement the WTO reforms efficiently and effectively.China’s corporate governance has an inevitable concentration of state-owned enterprises and this results in inadequate allocation of resources and also ineffective generation of profits. Another issue is that board of directors is not an independent body inChinaand the board of supervisors unlike other countries does not play a vital role in the governance ofChina. Insider trading is a problem in Chinese companies due to no mechanism of incentive generation. False financial reporting is common practice inChinawhich shows the lack of transparency in operations. The capital markets inChinaare not on a mature stage yet which makes it tough for companies to have corporate bonds issues. Table 1 (See Appendix) shows the ranking ofChinaamongst other countries after the advent of WTO in terms of corporate governance.
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