China Equity Market

Mainland China has two stock exchanges, located in Shanghai and Shenzhen respectively. Shanghai Stock Exchange (“SSE”) was established on 26 November 1990 and started trading on 19 December of the same year. Shenzhen Stock Exchange (“SZSE”) was established on 1 December 1990. There were eight listed stocks with a market cap of USD500 million when the two stock exchanges opened. As end of 2014 there are more than 2,500 listed companies, with a total market cap of more than USD6 trillion. The total market cap of China equity market would be more than USD10 trillion if including the Hong Kong Stock Exchange, ranking as the second largest in the world after the NYSE. The combined yearly market turnover for Shanghai and Shenzhen was more than USD10 trillion on 2014, third behind the NYSE and NASDAQ.


Main global exchanges by market cap (million USD)

Source: World Federation of Exchanges, as of 31 December 2014.


The two exchanges are under the direct management of the China Securities Regulatory Commission ("CSRC"). Their main functions include: to provide premises and facilities for securities trading; to develop the business rules of the exchanges; to accept listing applications and arrange for the listing of securities; to organize and supervise securities trading; to regulate exchange members and listed companies; to manage and disclose market information.

The SSE adopts an electronic trading platform. The trading of all exchange-traded securities are required to be submitted to the exchange’s matching engine which automatically matches orders based on price priority and time priority. The SSE's new trading system has a peak order processing capacity of 80,000 transactions per second. It has a bilateral transactions capacity of more than 120 million, which is equivalent to a daily turnover size of Renminbi ("RMB")1.2 trillion by a single market. The system also has parallel scalability.

The SZSE is essentially a multi-level capital market system architecture to fully support small and medium size enterprise development and promote the implementation of the national strategy of independent innovation. After years of development, it currently comprises three main boards and systems: in May 2004, it officially launched the Small and Medium Enterprise (“SME”) board; in January 2006, it started a pilot program for trading shares of non-listed companies of the Zhongguancun Science Park; and it officially launched the Growth Enterprises Market (“GEM”) board in October 2009.

After years of sustained development, the two exchanges have made great achievements in terms of the type and number of listings. Listed products now include: China A-Shares, China B-Shares, open-ended funds, close-ended funds, exchange traded funds and bonds. 

Market statistics of SSE & SZSE*


The above data as of 31 December, 2014.

*Index returns are for reference only and do not reflect any management fees, brokerage expenses, transaction costs or expenses. Indexes are unmanaged and investors cannot invest directly in an index. Index returns assume that dividends have been reinvested.

Chinese share types

Name Currency Description
Onshore Market
A-shares Renminbi Companies incorporated in the China, traded in Shanghai & Shenzhen; largest class of Chinese shares; investors are Chinese nationals and foreign institutional investors authorized under Qualified Institutional Investor ("QFII") and Renminbi Qualified Institutional Investor ("RQFII") systems
B-shares US dollar/
Hong Kong dollar
Companies incorporated in China, traded in Shanghai in US dollars and Shenzhen in Hong Kong dollars; investors were initially only foreigners, now also domestic retail investors
Offshore Market
H-shares Hong Kong dollar Companies incorporated in China, traded in Hong Kong
N-shares US dollar Companies incorporated in China, listed and traded on the New York Stock Exchange
L-shares Pound sterling Companies incorporated in China, listed and traded on the London Stock Exchange
Red chips Hong Kong dollar Chinese companies incorporated outside China, listed in Hong Kong; often state-owned or state-controlled companies
P chips Hong Kong dollar Chinese companies incorporated outside China, listed in Hong Kong; often run by private-sector China individuals
S-shares Singapore dollar Like H-shares but traded in Singapore

A-shares vs. H-shares

A-shares H-shares
Trade on the Shanghai & Shenzhen stock exchanges Trade on Hong Kong stock exchange
Onshore market Offshore market
Open only to mainland citizens and the Qualified Institutional Investors ("QFIIs") / Renminbi Qualified Institutional Investors ("RQFIIs") systems Open to international investors
Quoted in Renminbi Quoted in Hong Kong dollar
All Chinese sectors and companies available for
Limited number of Chinese sectors and companies available for investment
MSCI and FTSE considering adding to their most tracked global benchmarks Currently a component of MSCI’s and FTSE’s most tracked global benchmarks

Development of the China A-Share market

In the 1980s, to satisfy huge demand for capital to fund national economic development, the State started a pilot reform program implementing the joint-stock system, commencing initially in Shanghai, Shenzhen and several other cities. After the Reform and Opening up China's first stock - “Shanghai Feile Audio-Visual” was born in November 1984.

Then in 1990, the SSE and SZSE officially opened, marking the start of rapid development of the Chinese stock market. The China A-Share markets in SSE and SZSE commenced on 19 December 1990 and 1 December 1990 respectively.

Initially, trading in China A-Shares was restricted to domestic investors only, while China B-Shares were available to both domestic (since 2001) and foreign investors. However, since reforms implemented in December 2002, foreign investors have been allowed (with limitations) to trade in China A-Shares under the Qualified Institutional Investor ("QFII") program launched in 2003 and the Renminbi Qualified Institutional Investor ("RQFII") program launched in 2011.

After 20 years of development, the China A-Share market has since grown to become influential on the global market. The participants in the China A-Share market include retail investors, institutional investors and listed companies. The total market capitalization of the two exchanges combined as end of 2014 has reached more than USD6 trillion. And there were more than 2,600 China A-Share companies listed on the SSE and SZSE.

Equity Market Comparison

  China Hong Kong / US
Large-small cap liquidity Not obvious, Better liquidity for small cap stocks Obvious, Better liquidity for large cap stocks
Factors influencing liquidity Dominated by retail investors, largely influenced by domestic liquidity. Main indicators: Market settlement balance, number of new accounts, account activity Mainly influenced by international liquidity. Closely related to risk preference in overseas market, macro environment and money policies
Valuation Historical valuation is higher than major overseas markets; this difference has narrowed in recent years Historical valuation is lower than China A-shares; this difference has narrowed in recent years
Dividend Yield Low High
Investor Base Retail dominated Institutional dominated

Source: China International Capital Corporation Limited, as of 31 December, 2014.