The strange rise and sudden fall of the Chinese stock market

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The recent rollercoaster ride that the Chinese stock market went on puzzled the financial world and spawned extensive analysis and scrutiny.

At the end of 2014, China had a very normal stock market1. Measured by the size of the stock market, China’s market capitalisation of US$4tril, close to 40% of GDP at the end of 2014, can be considered as very normal compared to other economies with an underdeveloped financial system.

It is a far cry, no doubt, from the “superdeveloped” Hong Kong and some Asean stock markets. Compared to Europe, which has traditionally relied on bank finance and which has a stock market capitalisation of 43% of GDP on average (Germany’s is at 45% of GDP), China is not far off.


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