Abstract
The international integration of China's stock markets has particularly intensified following the rapid development of the Chinese economy in the early 2000s. The Shanghai and Shenzhen stock exchanges are now global financial centers, whereas in the early 1990s they were initially highly segmented and closed to foreign investment. The emergence of mainland Chinese stock exchanges thus raises many questions about the reforms implemented and the consequences on their degree of international integration. This thesis studies the consequences of this process of opening up on the evolution of relations between Chinese markets and the main world markets.Chapter 1 presents the process of reforms to open up China's economy and financial sphere. The objective is to contextualize this long process in order to identify major and structuring reforms of the current financial system. We retain that the opening process is not instantaneous and does not follow a pre-established plan. On the contrary, it is progressive, gradual and not homogeneous in its applications. This characteristic is reflected in a series of major structural reforms introduced in the 2000s to serve a new economic paradigm oriented towards international trade. Foreign investment, although initially highly controlled and confined to certain share classes, will see a gradual easing of restrictions as the continental financial and banking system gains its skills. To this end, Hong Kong, by its special status and its liberal system, is a cornerstone for more flexible measures on foreign investment in continental places.Chapter 2 is an analysis focusing on the changing relationship between mainland Chinese stock markets and the Hong Kong stock exchange. The objective is to assess the effects of the various opening-up reforms on relations between mainland Chinese markets (Shanghai and Shenzhen) and the Hong Kong market between 1993-2017. A wavelet time-frequency approach is used to study the intensity of co-movements between the Shanghai, Shenzhen and Hong Kong indices over time and for different cycles (short, medium and long) while indicating the predominance of one index over another. The results show that the level of long- and short-term correlation between mainland markets and Hong Kong has tended to increase at different rates. It appears, however, that the influence of mainland markets on Hong Kong increases after the reform, but Hong Kong still affects them strongly, especially in times of crisis and in the long term.While Chapter 2 deals with the role of Hong Kong, Chapter 3 finally examines the evolution of relations between Shanghai and the world's major markets. We pay particular attention to the evolution of the correlation between the different indices in order to analyse the consequences of the easing of foreign investment restrictions. We use multivariate GARCH models (DCC-GARCH) to calculate a dynamic correlation coefficient as well as a sensitivity parameter between different selected indices. It appears that China's mainland markets are more closely linked to Hong Kong and Japanese stock markets after 2007, confirming Hong Kong and Japan's key role as regional financial powerhouses. Similar developments, but with less intensity, are notable for the Shanghai-UK and Shanghai-Europe correlation. We note a different result regarding the links with the US index. The correlation is more stable and does not show a significant break in 2007, which tends to confirm a pioneering role in the integration process as a world leader.