The strange rise and sudden fall of the Chinese stock market


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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