Shanghai is the largest, both in number of companies listed and in market capitalization, of the three stock exchanges most important to Chinese companies. Hong Kong is the oldest but now second to Shanghai in size. Shenzhen, the newest and smallest of the three exchanges, focuses on small- to medium-tier companies that are often state-owned. All three exchanges have suffered declines in market capitalization from their 2007 peak.

Mainland China has two stock markets, the Shanghai and Shenzhen exchanges, and the Hong Kong Exchange also plays a major role in China. Before the establishment of the mainland exchanges, the Hong Kong Stock Exchange served as the principal exchange in which Chinese companies could raise capital. The maturing of the Shenzhen and Shanghai exchanges has given Chinese companies the alternative to raise capital within China in its local currency (renminbi).

The Three Exchanges

Japan’s Tokyo Stock Exchange is the Asian leader in terms of market capitalization (US$3.12 trillion in 2008). But today, the Shanghai and Shenzhen exchanges together list more than 1,500 companies with a combined market capitalization of US$1.78 trillion (2008). With the Hong Kong Stock Exchange (US$1.33 trillion in market capitalization in 2008), China can truly claim to rival Japan.

The Shanghai Stock Exchange

Located on the eastern coast, Shanghai is China’s largest city. As a center of commerce since the nineteenth century, it has been a hub of international commerce since the 1930s. Foreign investment was halted in 1949 with the Communist party takeover, but with economic reforms of the 1990s, it has regained its place as the center of finance and trade in mainland China.

Closed during the first years of the People’s Republic of China, the Shanghai Stock Exchange (SSE, 上海證券交易所) reopened in 1990. A non-profit, membership institution, it is directly governed by the China Securities Regulatory Commission. As mainland China’s largest exchange, its listed companies include Chinese gas and oil companies, banks, insurance companies, and high-tech sectors. The SSE treasury bond market is the most active of its kind in China. Trades in A shares are restricted to domestic investors, while B shares are open to all investors.

The SSE is the sixth largest exchange in the world and second only to Tokyo in Asia, with 861 companies listed. At its peak in 2007, its market capitalization was US$4.07 trillion. Reflecting the losses of 2008, the January 2009 market capitalization was US$1.557 trillion.

The Hong Kong Stock Exchange

The Association of Stockbrokers in Hong Kong was established in 1891, although there are reports of securities trading going back to the mid-nineteenth century. Economic reforms in 1999 led to the merger of the Stock Exchange with Hong Kong Futures Exchange to form the Hong Kong Stock Exchange (HKEx 香港交易所). At the end of 2007, Hong Kong Stock Exchange had 1,241 listed companies with a market capitalization of almost US$2.7 trillion, making it Asia’s third largest. In January 2009, its market capitalization was US$1.24 trillion.

HKEx’s listed companies include property development and strategic investment holdings companies (Cheung Kong Holdings), banks (HSBC, Industrial and Commercial Bank of China), and utilities (Hong Kong and China Gas). The principal regulator of Hong Kong’s securities and futures markets is the Securities and Futures Commission, which is responsible for administering laws governing securities and facilitating development of these markets.

Shenzhen Stock Exchange

Shenzhen, a city in Guangdong Province less than 50 kilometers from Hong Kong, was established in 1980 as China’s first Special Economic Zone. It has become an important business and economic center and is home to the Shenzhen Stock Exchange (SZSE 香港交易所). The smallest of the three China exchanges, it is the ninth largest stock exchange in Asia, based on a market capitalization of US$7.85 billion in 2007 and US$3.89 billion in January 2009.

Listings on the SZSE are mostly small- to medium-tier companies; many are state-owned enterprises in which the Chinese government, which views the stock market as a means of raising capital, has a controlling interest. Among the most actively traded stocks are Tang Steel, a large state-owned steel manufacturing enterprise; China Vanke company, the largest residential real estate developer in the People’s Republic; and Guangdong Electric Power Co. Like the Shanghai Stock Exchange, Shenzhen Stock Exchange is governed by the China Securities Regulatory Commission.

Chinese Companies Abroad

The Chinese exchanges are, in comparison to the New York Stock Exchange (NYSE), smaller and less active. But the role of Chinese companies on the international exchanges is growing. The NYSE celebrated the thirtieth anniversary of the establishment of diplomatic relations between the United States and China with the ringing of the opening bell by National Committee on United States–China Relations president Stephen Orlins on 5 January 2009. Accompanying Orlins were former secretary of state Henry Kissinger, China’s ambassador to the United Nations, China’s consul general in New York, and the Commissioner of the National Basketball Association—because the NBA is fast expanding its presence in the Chinese media market. The forty-five People’s Republic of China companies listed on the NYSE had a market capitalization of US$802 billion.

Growth and Contraction

The year 2007 could be called one of “market frenzy.” The Chinese rushed to invest savings in the Shanghai and Shenzhen markets; Shanghai grew more than 300 percent in market capitalization over 2006. China led the world in the number of new shares offered. The companies with initial public offerings were, in general, big state-owned enterprises in the oil and gas industries, mining, and banks. Alibaba, Asia’s number one business-to-business portal, drew international attention and acclaim with its initial public offering on the Hong Kong stock exchange, raising US$1.5 billion.

The decline in manufacturing caused by the global downturn of 2008 forward had drastic impact on Alibaba and on new Chinese companies hoping to follow in its success. In 2008, the Shanghai exchange lost over 60 percent of its market capitalization; Shenzhen exchange lost close to that. The Hong Kong exchange, which lost approximately 49 percent of its market capitalization in 2008, continues to play an important role as an exchange for Chinese companies.

Chinese officials have expressed optimism that economic stimulus efforts by the Chinese government in2009, including investment in infrastructure, along with increased commercial lending will reverse the downward slide that stocks suffered in 2008.

Further Reading

Chong-En Baia, Qiao Liua, Lua, J., Songa, F. M. & Junxi Zhanga. (2004). Corporate governance and market valuation in China. Journal of Comparative Economics, 32, 599–616.

Hong Kong Exchanges and Clearing Limited. (2009). Retrieved February 18, 2009, from

Shanghai Stock Exchange. (2009). Retrieved February 18, 2009, from

Shenzhen Stock Exchange. (2009). Retrieved February 18, 2009, from

Thomas, W. A. (2001). Western Capitalism in China: A history of the Shanghai Stock Exchange. Aldershot, U.K.; Burlington VT: Ashgate.

World Federation of Exchanges. (2009). Retrieved February 17, 2009, from

A man’s greed is like a snake that wants to swallow an elephant.


Rén xīn bù zú shé tūn xiàng

Source: The Editors. (2009). Stock Markets. In Linsun Cheng, et al. (Eds.), Berkshire Encyclopedia of China, pp. 2099–2101. Great Barrington, MA: Berkshire Publishing.

Stock Markets (Gǔpiào shìchǎng 股票市场)|Gǔpiào shìchǎng 股票市场 (Stock Markets)

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