China's Stock Market

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There are two main stock exchanges in China, the Shanghai Stock Exchange, and the Shenzhen Stock exchange.

The Shanghai Stock Exchange (SSE) is a Chinese stock exchange located in Shanghai. The Shanghai Stock Exchange, with a market value of US$4.0 trillion as of November 2018, is the world’s fourth biggest stock exchange by market capitalisation.

The Shanghai Stock Exchange, unlike the Hong Kong Stock Exchange, is still not completely accessible to international investors and is frequently influenced by central government decisions due to capital account limitations imposed by Chinese mainland authorities.

There are 1,860 listings on the exchange, and they are denominated in Chinese yuans.

As a competitor to the NASDAQ, the Shanghai Stock Exchange created the STAR Market in 2019, which features exclusively technology-related firms.

On the Shanghai Stock Exchange, there are two categories of stocks: “A” shares and “B” shares.

The local renminbi yuan currency is used to price A shares, whereas the US dollar is used to price B shares. Trading in A shares was initially confined to local investors exclusively, but trading in B shares was open to both domestic and foreign investors.

Foreign investors are now authorized (with restrictions) to trade in A shares through the Qualified Foreign Institutional Investor (QFII) program, which was officially started in 2003, after changes were completed in December 2002.

A total of 98 foreign institutional investors have been granted permission to acquire and sell A shares at this time. The most widely utilized indicator to represent SSE’s market performance is the SSE Composite (also known as Shanghai Composite) Index.

All Shanghai Stock Exchange listed stocks (A shares and B shares) are included in the SSE Composite Index.

Shenzhen Stock Exchange (SZSE) is a stock exchange located in Shenzhen, China. It is the 9th biggest stock exchange in the world, and the 4th largest in East Asia and Asia, with a market value of about US$2.504 trillion in 2019.

There are 2375 listings on the exchange, and they are also denominated in Chinese yuan.

Because of the restrictions on foreigners to buy shares directly on these exchanges, most foreigners will buy American Depository Receipts of Chinese shares listed on US exchanges, instead of buying on the Chinese exchange directly.

Also, Chinese companies are listed in other overseas markets such as Hong Kong and Singapore, but the access and choice is then limited.

The Chinese economy
The People’s Republic of China’s economy is a growing market-oriented economy with economic planning included through industrial policies and strategic five-year plans.

The economy, which is dominated by state-owned companies (SOEs) and mixed-ownership firms, also has a substantial domestic private sector and is open to international corporations, making it a socialist market economy.

State-owned firms accounted for approximately 60% of China’s market capitalization in 2019 and would produce 40% of China’s GDP of US$15.66 trillion in 2020, with the remaining 60% made up of local and international private businesses and investment.

The total assets of all Chinese SOEs, including those in the banking sector, hit US$78.08 trillion by the end of 2019. Ninety-one of these SOEs are Fortune Global 500 businesses in 2020.

China has the world’s second-biggest economy by nominal GDP, and the world’s largest economy by purchasing power parity (PPP) since 2014, which some believe is a more accurate assessment of an economy’s real size.

Since 2010, it has been the second biggest by nominal GDP, relying on market exchange rates that fluctuate. According to government projections, China will overtake the United States as the world’s largest economy in nominal GDP by 2028.

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