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Chinese High-growth and Violent-fluctuation Securities Market

As an emerging high-speed growth securities market, Chinese securities market has achieved significant progress within over 10 years. The trading and settlement network of Shanghai Stock Exchange and Shenzhen Stock Exchange have covered the overall China. Chinese securities market possesses global advanced trading technologies and complete laws and regulations. The unified securities market regulation system in China has been built. Chinese securities market plays a vital role in promoting the reform in state-owned enterprises, Chinese economic structure adjustment and technology advancement.


In 2007, the A share market value of Shanghai Stock Exchange and Shenzhen Stock Exchange hit the new high, rising by 269% YOY. The aggregate A share market value of Shanghai Stock Exchange and Shenzhen Stock Exchange ranked the fourth in the world, following USA, Japan and UK. By the end of 2007, there were 1,550 listed companies in China; the stock market value of Shanghai Stock Exchange and Shenzhen Stock Exchange totaled RMB 32.71 trillion; the market value of stocks in the secondary market reached RMB 9.31 trillion; there were 92 million valid securities accounts by investors.


Moreover, revenues of various businesses were increased significantly and the innovation range was broadened. According to rough estimation, in 2007, the trading amount of stocks, funds, bonds and warrants exceeded RMB 46 trillion, rising by 120% compared with the GDP in 2006. The daily trading amount reached RMB 184 billion. The trading amount in May, June and August all exceeded RMB 240 billion with the highest in May of RMB 332.2 billion. Provided the service charge rate was 0.15%, in 2007, the gross service charge revenue of securities traders would be RMB 150 billion, rising by nearly 500% YOY. The underwriting business income of securities traders was also increased obviously compared with that in 2006. In 2007, the IPO financing amount in Chinese A-share market came up to RMB 447 billion, ranking the first in the world. The aggregate financing amount reached RMB 729.3 billion. 120 new shares were issued, including 12 large-cap shares on the main board market. The raised capital amounted to RMB 382.9 billion, accounting for 85% of the total IPO financing amount in 2007. The A share IPO financing amount was raised by 279% compared with that in 2006.


Chinese securities market performed excellently in 2008H1. Chinese asset securitization level catches up with the world advanced level within one year. At the end of 2008H1, the market value of Chinese domestic listed companies came up to RMB 32.7141 trillion, growing by 265.9% compared with that at the end of 2007. In 2007, Chinese GDP was RMB 24.6619 trillion, rising by 11.4% YOY. Thus, Chinese securitization rate was as high as 132.65% in 2008H1, increasing by 89.96% YOY.


However, since 2008H2, due to the financial crisis and the depressed global economy, Chinese securities market suffered great losses. In 2009, with the release of Chinese monetary policies and Chinese economic recovery, Chinese securities market begins to restore obviously.


There are also some problems existing on Chinese securities market: GEM has to be developed steadily; the qualities of listed companies must be improved; the derivatives market should be developed vigorously; the regulation on Chinese capital market should be enhanced to prevent and alleviate risks.

In general, Chinese economy is still in the high-growth and violent fluctuation stage. Thus, Chinese securities market is also featured with high growth and violent fluctuation. There is a long way for Chinese economy and Chinese securities market to enter the mature stage. The development of derivatives will face risks and pressures.

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