M4A2 Case : Industrial Commercial Bank of China - Assignment Example

Industrial Commercial Bank of China Industrial Commercial Bank of China Why the global capital market has grown so rapidly in recent decades?A capital market is a market where the government, local authorities and the industries act as the source of long term capital through banks, insurance companies, pension funds and private investors. A developed country is distinguished from, and industrial country using the presence and sophistication of their capital markets in which capital markets is either missing or dormant in developing countries.

The rapid growth of the global capital market is mainly linked to the increase in privatizations from below 5 percent in the 1975s to around 20 percent at present. Rapid growth in the stock market capitalization and trading volume in which the total market capitalization increased to $ 35 trillion until 1999 and while us market increased from $1.9 to $16.6.Worldwide acquisitions and mergers surge activities that increased dramatically in Europe and the world as a whole. Tremendous growth in securities issuance volume from 1990, as observed in the US whose securities issues, rose to $1.

19 trillion in the 1999s from $191 billion in the 1990s.Increase in venture capital financing in the United States reflected a change in the patterns of raising funds by the private investors and also made United States have higher competitive advantages over other countries. Growth in returns from privatization programs by the state that inflated state revenues. The share issue privatization mandates, as introduced by privatization, created stiff competition n among the international investment banks as such shares aided in promoting the markets capacity to absorb other stock offerings from the private companies.

Did the globalization of capital markets contribute to 2008-2009 crisis? The globalization of capital markets contribute to 2008-2009 crisis. The global financial crisis of 2008-2009 is a state where the risk of economic environment downheartedness as well as the strength of economic policy rejoinders substances. This world financial crisis is still ongoing, being felt 2008 with the fiasco and fusion of plentiful large U.S based financial companies (Savona, Kirton, & Oldani, 2011). This world crisis was believed to have been caused by the following; classical prices of assets that emerged U.

S housing sector in 1995 and continued increased after 2001,this was contributed by ill-designed policy by the financial system .This led to banking crisis ,including liquidity crisis .,the failure of Lehman Brothers in September 2008where there was a poor judgment of what accelerated the spreading of financial crisis to the national and world economy ,especially the role of vulnerable interbank market (Savona, Kirton, & Oldani, 2011). This lowered the rate of spending globally and globalization on capital markets that did away with the source of capital and credit controlled environment nationally and made them in unregulated global environment.

What can be done to stop global financial contagion in the future?In order to weed out the impacts of the global financial crisis of 2008-2009 as highlighted above, a state or the victims should have both sober macroeconomic rules stable financial system (Savona, Kirton, & Oldani, 2011). The macroeconomic rules are inflation control measures that keeps the inflation growth rate as low as possible. The macroeconomic rules consequently promote growth by ensuring that effects of and inflation is always small.

ReferenceSavona, P., Kirton, J. J., & Oldani, C. (2011). Global financial crisis: Global impact and solutions. Farnham, Surrey, England: Ashgate.