The Development and Problems of the Chinese Market Short Selling System

Abstract

This paper focuses on the short-selling mechanism in the Chinese capital market, which is not fully mature at this stage, and firstly explores the current development of its shorting behavior and related activities to show its impact on the market operation. Secondly, it analyzes important development issues such as low shorting activity, lagging shorting development process, and information disclosure. Research finds that the lag of shorting activities in the Chinese market is mainly due to the limited availability of underlying assets and the degree of information disclosure directly affects the activity of shorting. Overall, this paper has implications for the development of short selling in China's capital market and suggests constructive ways to improve the short selling mechanism in China's market and even in emerging markets.