However, in this duration of time, China had to go through certain obstacles. On the basis of the analysis done on the articles, ‘Enterprise ownership and control in China: Governance with a Chinese twist,’ and ‘China Netcom: Corporate Governance in China (A)’, these obstacles have been identified as follows:
Immense concentration on ownership of state: Two-third of the corporations listed within the Shanghai Stock Exchange is enterprises of the state. This can be referred to as the legacy of the economy controlled by the state (Abrami et al. 2008). This particular issue has been identified as the main source of a number of obstacles for progressing listed here.
These include low level of independence amongst the Boards of Directors and rampant trading by insider. It also has an influence on the diversion of resources away from the companies. This reduces the rate of liquidity within the capital markets, and discourages minority investors to be engaged in investments on long-term basis. However, since the formation of new reforms, there has been an improvement in the protection and safety of minority shareholders, but it still remains hard for them to be disagreeing on the facts by state shareholders.
Low level of independence amongst the Boards of Directors: This particular obstacle has been identified as the direct outcome of concentration on ownership. Selection and removal of members from both, boards of supervisors and corporate boards of directors by the dominating owners of the organization. This is more often the government of China (Abrami et al. 2008). Due to this, there are more chances that the directors will be impeding to carry out the fiduciary duties; whereas, there are less chances that the supervisors will manage to exert improved level of independence from senior managers as well as board of directors.