The capital markets play a critical role in allocating capital between savers and investors. It is through this function that society benefits by providing capital to new and innovative companies who require it. In exchange from money provided by capital providers these companies in turn share their profits with shareholders ultimately enhancing the overall wealth of society. Underpinning the performance of the capital markets are oversight committees which ensure the ethical integrity of market participants. These oversight committees attempt to ensure a level playing field that allows a free and fair exchange of information and trading activity. It is here were the public function derived from this activity differs from country to country. This gap is particularly apparent when comparing the United States with China. Although both services attempt to monitor and instill confidence in the functioning of the capital markets, they differ in their overall manner of enforcements. In addition, both countries differ in their overall foundation in oversight of the capital markets.

In the United States, the Securities and Exchange Commission regulates the activities of the capital markets. According to the company website, the mission of the SEC is to protect investors; maintain fair, orderly, and efficient markets; and facilitate capital formation. The equivalent organization in China is referred to as the China Securities Regulatory Commission. Here the CSRC is a state-owned enterprise and is not as independent as the SEC as it relates to capital markets regulations. As of 2021, the SEC still retains its independence. This will be a critical differentiating factor between the two agencies as we shall soon see (Afterman, 2015).

To begin, the SEC was established in response to the massive corruption and fraud that occurred during the great depression and the subsequent stock market crash of 1929. Prior to this period a massive economic boom helped to increase the livelihood and wellbeing of American society. The industrial revolution ushered in a period of unprecedented economic growth. During this period prosperity, consumerism, overproduction, and debt...…behaviors have grave implications for public security, confidence, and financial policy in both countries. Currently both countries are using accommodates fiscal and monetary policies to stimulate their respective economies due to the China virus. This stimulus combined with low interest rates have caused significant asset price appreciation. In fact, we have seen GameStop shares increase by over 1000% within a week. This speculative environment is like what was experienced prior to the great depression, discussed earlier. In response the SEC has initiated government investigation into the market speculation in hopes of curtailing a pending market bubble. China on the other hand has not intervened, electing instead to allows companies to issue stock at inflated prices. When the eventually collapse occurs stocks holders will be left with losses while Chinese companies take immediate cash to fund operations. As a result, the key stakeholders, which are market participants get stuck with losses while corporations use the funds to pay large salaries, bonuses, and other forms of corporate malpractice. The SEC attempt to…