China Briefing

China’s Equity Capital Markets: Shift to onshore (Part II of IV)

Executive summary

  • This month we continue our focus on China’s capital markets by mapping China’s large, liquid, and complex equities landscape.
  • China still has a miniscule share of global capital flows given its overall economic clout. That is because its equity markets are young and prone to pronounced boom and bust cycles, in which you can gain or lose a fortune quickly across different company types, sectors, and individual stocks.
  • Such volatility is understandable given how young China’s capital markets are and the history of how they developed. Today, there are three different markets, each with their own traits and all of which list Chinese companies. But there are still overhangs, overlaps, and iniquities leftover from the past that we need to be mindful about.
  • The government is torn: it can be highly interventionist as it tries to manage volatility and prevent what it sees as over-financialisation and inadequate focus on real economic issues, but it also wants to integrate into global capital markets and have their best and brightest companies list at home rather than abroad.
  • With the US market becoming progressively closed off, people who want to participate in China’s growth story will need to go into China’s onshore markets.