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We acknowledge the helpful comments from two anonymous referees. We are responsible for any remaining errors. JEL classification: G1, G2, and G3.


We review the financial research on China as a transitional economy over the past fifteen years or so. This review sheds light on several important issues that are pertinent for an emerging financial market - how regulation can affect the prices of different financial assets; how and why markets are segmented; corporate governance effects between major and minor shareholders in an emerging market; the importance of a bank-based financial system; interactions between the financial market and the goods market; how market participants can complete the market; and how an emerging financial market emulates established markets and evolves over time. Many unexplored financial issues remain unexplored, and more research is warranted into, what theories are at work, and what are missing.


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