Institutional Changes in Capital Markets and the Efficiency of Resource Allocation Amid the Reshaping of the Global Financial Landscape: A Comparative Analysis of the Chinese and US Markets

Abstract

The restructuring of the global financial landscape has increased the importance of capital-market institutions in determining how efficiently financial resources are priced, mobilised, and allocated. This study examines the mechanisms through which institutional change affects resource-allocation efficiency, drawing on a comparative analysis of the Chinese and US capital markets. It applies a comparative institutional approach informed by institutional economics, information asymmetry theory, behavioural finance, and asset-pricing theory. The analysis focuses on China’s registration-based reform, investor protection, institutional-investor development, market connectivity, cross-border exchange-traded funds, and the restructuring of strategic mineral industrial chains, while examining fiscal credibility, Treasury issuance and buybacks, and the reassessment of term premiums in the United States. The analysis suggests that institutional change influences resource allocation through several interconnected mechanisms, including information disclosure, financing costs, investor composition, market liquidity, price discovery, cross-border capital flows, and risk premiums. In China, market-oriented reforms have expanded financing opportunities for technology- and innovation-driven enterprises; however, a retail-dominated investor structure, market volatility, and uneven regulatory effectiveness continue to constrain allocation efficiency. Capital-market internationalisation broadens investment opportunities and facilitates price discovery but also increases exposure to external financial shocks and regulatory spillovers. The restructuring of strategic mineral industrial chains further demonstrates how resource endowments, production costs, and vertical integration reshape corporate valuation and capital allocation. In the United States, increasing Treasury supply and concerns about fiscal sustainability have contributed to the reassessment of term premiums, with significant implications for global benchmark interest rates and emerging-market financing conditions. The study develops an integrated framework showing that efficient capital allocation depends on the interaction between market-oriented reform, micro-level governance, regulatory capacity, and macroeconomic credibility. It also highlights the need to balance financial openness and product innovation with investor protection, macroprudential oversight, and systemic-risk management.