The development of stock markets is one of the most important elements of China’s reform in the financial system. Before the late 1970s, the government strictly controlled virtually all channels of investment. All investments made by enterprises were either from direct grants from the state budgetary funds or from government allocated bank credits. The whole financial system was dominated by the state-owned banks, such as the PBC, a few specialized banks and their local branches. The bureaucratic process that allocated investments across regions and sectors was often inefficient, and in many cases, caused a significant waste of resources.