Chinese stock markets recently showed rise. But despite this, the Chinese index returned to the levels after a dramatic bubble exploded a decade ago. Good returns encouraged consumers to spend but weak equity returns have pushed them towards savings. A decade ago, an investment of $ 10,000 in the S&P 500 index would currently be more than three times. But in China’s CSI 300 benchmarks, the same amount adds to just $ 3,000.
The size of China’s stock market is $ 11 million. Spending less and more saving of Chinese people remains a headache. According to Bloomberg, those who have been watching China for a long time say that one of the reasons is structural. The exchanges created 35 years ago have not been emphasized on giving returns to investors. It has given rise to many problems, which are constantly affecting the Chinese stock market.
5% trust in domestic expenses to reach the target of economic growth
There is pressure on the leaders of the country to fix it. Chinese President Xi Jinping is relying on domestic expenses to reach 5% economic growth target. Especially when the tariff war with the US is intensifying. China also has the reasons for prioritizing the role of the market as a source of capital. The country needs a big money to fund its technical ambitions, even though their profitability is under question.
Experts say that China’s capital market has long been heaven for financers and hell for investors. Regulators and exchanges are always deliberately or unknowingly bending in favor of finance of businesses.
This year CSI 300 index increased less than 7%
Talking about the move of China’s stock market so far this year, the CSI 300 index has increased less than 7%. It lags behind the benchmark of America and Europe. The savings rate in China is exceptionally high. This rate is 35% of disposable income. In some ways, this plight of the Chinese market remains for decades. According to Bloomberg, although China’s top leadership in the last one year has shown more awareness about the importance of the stock market as a means of wealth creation. Experts say that apart from the boom in the stock market, there is no quick way to increase domestic confidence.
Tremendous increase in new listing
The tremendous increase in the new listing made China the world’s largest IPO market in 2022. Nevertheless, there was a huge decline in share prices due to insufficient security measures for shareholders and loose monitoring of IPO fraud. Companies were also delivered. But it is also worth noting that in recent years efforts have been increased to check poor quality IPO and to tighten financial fraud. Emphasis is also being laid on the release of additional stocks by listed companies and reducing share sales by major stakeholders. Not only this, investors are being encouraged to transfer more corporate profits. However, the reforms have failed to convert the market to the market prioritizing the investors.