After 15 years of development, China's capital markets are no longer the wild east of yesteryear. But that's not to say all irregularities have been ironed out. Much of the hesitation about liberalisation and greater openness is due to the markets' role, intricately linked to a shaky financial system that provides a lifeline to the state sector. Let's begin with the earliest products: A shares and the foreign-currency-denominated B shares introduced to give foreigners a slice of the China market. The B shares are now languishing. With no new IPOs in the past few years, it's been hard to generate interest in a market with total capitalisation of less than $50 billion, despite the opening to domestic investors in February 2001. In the meantime, the A-shares markets with capitalisation of 3.5 trillion yuan have offered potential, even though there is no immediate end in sight to a protracted slump that began in June 2001. Realistically, China's accelerating opening up to the rest of the world has made B shares redundant, more so since regulators started allowing qualified foreign institutional investors into the A-share markets in 2004. This explains the lingering expectation among industry players of an eventual merger of A and B shares. How soon is anyone's guess, but a merger would be more than a structural correction as it would hinge on the bigger issue of the Chinese currency. Beijing wants to unify the different classes of shares to streamline its exchanges to meet global standards and hold listed companies more accountable to shareholders by making companies convert their non-tradeable state shares into tradeable A shares. During the past two years, it has emerged that Shanghai will become the country's main board and Shenzhen the platform for hi-tech firms and upstarts. Official approval has not come through, but the Shenzhen exchange last year launched a small- to medium-sized enterprises board. Theoretically, the faster that regulators approve a Nasdaq-style second board for Shenzhen, the better it will be for the nation and the city's ambitions to become a global hi-tech and innovation centre. The likes of hi-tech giants such as Huawei Technologies may have banks lining up to provide fodder, but this is not the case for many private firms shunned by state banks fearful of defaults. To regulators, a second board is another ball game altogether, one that requires further moves away from the planned economy approach, and needs conservative management and governance. Beijing knows too well that risk management isn't its biggest strength, and the concerns are justifiable when a comprehensive regulatory and legal framework remains under construction. China might only be halfway towards a market economy, but it has come a long way - with a revaluation of the yuan last July, re-launches of derivatives products and approval of international practices such as share buybacks, to name a few. Industry players are calling for less government interference to let market forces run the show. Regulators have suspended IPOs since state share reforms started last April, but better-managed companies have now been forced to look abroad to raise funds. With no new investment targets, retail investors remain bystanders. The critics point to the services industry, which Beijing unintentionally let run its own course, leading to underreported GDP of US$300 billion. With that in mind, a little more liberalisation may not be all that bad.