The cross holding of company shares

Cross shareholding is a practice whereby pairs of companies exchange holding of shares. It is vitally important to recognize that cross shareholding has both positive and negative effects, the latter of which demand particular scrutiny. This article tries to suggest a possible framework for the regulation of cross shareholding in China, by mainly applying lessons and implications from the experiences of Japan, where cross-holding has contributed to the spike and collapse of its economy. Currency appreciation, accounting rules changes and capital market restructuring are putting China in the similar shoes. Targeting at different situations, hereby a spectrum of rules has been proposed.