Interested in China’s stock markets today? Do you want to receive useful information? Do you want to know about the largest companies in China? Or buy stock? You will find the answers here.
The stock markets in China are now very important. It should be noted that this applies not only to the country’s industry, but also to its stocks and bonds. In turn, many internal factors influence the state of the PRC stock market. In addition, in recent months such a factor has emerged as the epidemiological situation in the world. The PRC stock markets are specific. In them, most of the shares are owned by private investors and state-owned companies. On the other hand, the controlling stakes in each enterprise belong to the state.
- China’s stock markets today and their origins
- Stock Markets in China Today: The Origins 1900-1949
- Stock Markets in China Today: Reforms in 1978-1990
- China Stock Exchanges: Development 1991-2000
- China’s Stock Markets Today: Rapid Development in the 21st Century
- Reforms: China’s stock market in the 2010s
- The largest companies in China
- The largest companies in China: the top five
- Sinopec Group 中国 石油 化工 集团 有限公司
- State Grid Corporation of China 国家 电网 有限公司
- China National Petroleum Corporation (CNPC) 中国 石油 天然气 集团 有限公司
- China State Construction Engineering Corporation (CSCEC) 中国 建筑 股份有限公司
- Ping An Insurance 中国 平安 保险 (集团) 股份有限公司
- The largest companies in China: 6-10 places
- Industrial and Commercial Bank of China 中国 工ր 银行
- China Construction Bank 中国 建设银行
- The Agricultural Bank of China 中国 农业 银行
- Bank of China Ltd 中国 银行
- China Life Insurance Company 中国 人寿保险 股份有限公司
- The largest companies in China: 11-15 places
- Huawei Technologies Co. Ltd.华为 技术 有限公司
- China Railway Engineering Group 中国 中 铁 股份有限公司
- SAIC Motor Corporation 上海 汽车 集团 股份有限公司 | (上汽 集团)
- China Railway Construction Corporation (CRCC) 中国 铁 建 股份有限公司
- China National Offshore Oil Corporation 中国 海洋 石油 集团 有限公司
- The largest companies in China: 16-20 places
- China Mobile Limited 中国 移动 有限公司
- Pacific Construction Group 太平洋 建设 集团
- China Communications Construction Company 中国 交通 建设 集团 有限公司
- China Resources (Holdings) Company Ltd.华润 (集团) 有限公司
- First Automobile Works 第一 汽车 制造厂
- The largest companies in China: 21-25 places
- China Post Group 中国 邮政 集团 有限公司
- Amer International Group 正 威 国际 集团
- China Minmetals 中国 五矿 集团 有限公司
- Dongfeng Motor Corporation 东风 汽车 集团 有限公司
- JD.com, Jingdong Mall 京东 大 网
- The largest companies in China: 26-30 places
- China Southern Power Grid 中国 南方 电网 有限 责任 公司
- Hengli Group 恒力 集团
- China Energy Investment Corporation 国家 能源 投资 集团
- Sinochem Group 中国 中 化 集团 有限公司
- China Baowu Steel Group Corporation Limited 中国 中 钢铁 集团 有限公司
- Stock Markets in China Today: State of the Art
- Stock Markets in China Today: Major Stock Exchanges
- Shanghai Stock Exchange is the most important regulator of China’s economic development
- Stock markets in China today and the exchange rate of the yuan against the dollar
China’s stock markets today and their origins
Despite the country’s long history, the Chinese stock market began to emerge in it only at the beginning of the 20th century. Up to this point, there have been many upheavals, coups and wars in China. Accordingly, this led to economic instability. Therefore, in such conditions, it was impossible to speak of the emergence of the stock economy.
The precondition for the formation of the exchange was the Opium War, which was lost by China in 1842. In accordance with the Nanjing Treaty, foreigners had the right to actively intervene in the country’s economy. This led to the formation of the stock market in the 1860s. A few years later, the Shanghai Stockbrokers Association was founded.
The founders were businessmen from England, USA, France. Before that, securities were traded, but spontaneously, without centralized management. In 1895, China lost another war, the Sino-Japanese war.
On the other hand, this opened up additional opportunities for foreign funds to enter the Chinese economy. Enterprises and companies owned by Japanese and Europeans were opened in the country. After 1985, foreign investors again gained access to the Shanghai market.
Stock Markets in China Today: The Origins 1900-1949
The first stock exchange was formed in Shanghai. It started working in 1904, but it was not officially opened until 1920. Later, sites were opened in Tianjin and Beijing. Government bonds accounted for most of the turnover, the share of private capital was extremely small. The Shanghai Stock Exchange was the largest in Asia. Later it was integrated with New York.
But at the beginning of World War II, the Shanghai site was closed for the entire period of the occupation of China by Japan. After the war, the exchange resumed its work, but after the 1949 revolution, the Communist Party came to power, and its leadership stopped the work of all exchanges – the first stage in the history of the Chinese stock market was short. The closure of the sites was politically justified, but the country’s economy suffered from this. Hunger and total poverty of the inhabitants became a natural consequence of the revolution.
“It doesn’t matter what color the cat is – white or black, as long as it is good at catching mice.”
“不管 白猫 黑猫 ， 捉到 老鼠 就是 好 猫”
Deng Xiaoping 邓小平
After the start of the reforms 改革 开放, one of the first joint stock companies was the Tianqiao Department Store Co. Ltd. After him other companies appeared, and by 1989 there were already thousands of them. But the prices for their shares were fixed by the state, and the securities themselves were not the property of citizens – they only received dividends on them. It was impossible to sell securities, the ban naturally provoked “street trading”.
Stock Markets in China Today: Reforms in 1978-1990
Finally, in 1990, a resurgence of the Chinese stock exchange began. Clandestine stock trading flourished and could not be overcome by any means. And the government of the People’s Republic of China acted wisely: since you cannot win, lead (control). The government authorized the opening of the Shanghai Stock Exchange. Since then, China has become the second country in the world with a socialist system that has its own stock market. The first such country was Hungary.
China Stock Exchanges: Development 1991-2000
In 1990, the Shanghai site was opened, and in 1991, another one, in Shenzhen. At that time, Shenzhen was the most economically developed territory in China. In Shanghai, most of the shares were held by former large state-owned enterprises. They were reorganized into joint stock companies. On the Shenzhen Stock Exchange, securities were sold not only of companies controlled by the state, but also of joint ventures cooperating with Hong Kong. But the main indicators of the two sites were similar, and they developed at the same rapid pace.
上海 证券交易所 – Shanghai Stock Exchange
深圳 证券交易所 – Shenzhen Stock Exchange
These two exchanges are the main ones in the PRC.
To control this segment of the economy, the State Committee for the Regulation of the Securities Market (中国 证券 监督 管理 委员会) was established in 1992. To be listed, each company must:
- Bringing stable profits for the last 3 years.
- Capitalization – from 30 million yuan (三 千万 人民币)
- With a capital of more than 400 million yuan （四亿 人民币）, at least 15% of it must be placed on the exchange.
- The company must have at least 1 thousand shareholders （不少于 一千 名 股东）
China’s Stock Markets Today: Rapid Development in the 21st Century
In the 21st century, China has developed rapidly, it has become a leader in economic growth, having achieved phenomenal indicators. This growth was facilitated by:
- State support for innovation.
- Effective innovation policy.
- Helping high-tech businesses.
- Development of science.
- Transfer of production from Western countries to the PRC.
- Technology import.
- Large domestic market.
- The largest human resources among all countries.
- Large resources in scientific and technical fields.
- Active export of goods to the countries of Asia, Europe, USA.
In 2004, exports of high-tech goods exceeded imports. Then, after joining the WTO, the rate of production of such products outstripped the average annual indicators by several times. The active development of enterprises and the economy as a whole influenced stock exchanges. But their work was not efficient enough until the next reforms.
Reforms: China’s stock market in the 2010s
For the further development of the PRC stock market, its liberalization was needed. The reforms were aimed at this, which were carried out in accordance with the position of the IMF. China’s liberalization strategy was characterized by:
- Consistency (foreign direct investment was immediately liberalized, followed by portfolio flows, the inflow of funds was ensured before the export of capital from the PRC was allowed).
- Use of quotas – restrictions on the amount of flows have been introduced.
- Targeting individual investment groups.
The reforms resulted in the permission for qualified foreign investors to invest bonds through the quota system, in the interbank and foreign exchange markets. Since 2011, foreign investors have been able to use their yuan to invest in the domestic securities market. Also, unrestricted access of Chinese securities to the interbank market was provided for sovereign wealth funds and central banks.
In 2016, the renminbi was included in the special drawing rights currency basket, which increased the interest of foreign investors.
And since April 2019, government bonds, bonds of “political” banks have already been included in the global Bloomberg Barclays index.
The largest companies in China
China is striving to occupy a leading position in the world arena in many areas. To understand the development trends of the state and business in it, you should familiarize yourself with the TOP-30 largest companies in China in 2020.
The largest companies in China: the top five
Sinopec Group 中国 石油 化工 集团 有限公司
One of the largest state-owned companies.
Field of activity: petrochemistry and oil refining.
The corporation was founded in 1983, but reorganized 15 years later.
Sinopec is now state owned. It is the largest enterprise in China.
State Grid Corporation of China 国家 电网 有限公司
A power grid company recognized as the largest in the world in this industry.
Provides jobs for over 900 thousand people.
Consists of 5 subsidiaries.
Founded in 2002, owned by the state.
Business profile: construction and operation of power grids not only in China but also abroad.
China National Petroleum Corporation (CNPC) 中国 石油 天然气 集团 有限公司
The largest oil and gas company in China (fourth place among all companies in the world). Refers to state-owned enterprises. The official date of foundation is 1988, but the prerequisites for creation appeared back in 1950. It is with CNPC that Gazprom, Rosneft and Transneft cooperate.
China State Construction Engineering Corporation (CSCEC) 中国 建筑 股份有限公司
Construction company, one of the 20 largest contractors in the world. The company was founded in 1957. Business profile: construction of not only residential and industrial buildings, infrastructure facilities, but also investment, property management.
Ping An Insurance 中国 平安 保险 (集团) 股份有限公司
An insurance group of companies. It works in the main four types of activities: life insurance, property insurance, investment and banking services. A public company founded in 1988. Now the company has offices not only in China, but also in the USA.
The largest companies in China: 6-10 places
Industrial and Commercial Bank of China 中国工商银行
The largest commercial bank, one of the “big four” state-owned banks in China. The bank was founded in 1984, in 2005 it was transformed into a joint stock company. Provides not only services to private and corporate clients, but also provides treasury services. In addition to China, it has its own organizations in 45 other countries.
China Construction Bank 中国 建设银行
China Construction Bank, also a member of the Big Four. It was founded in 1954 and until 2004 was subordinate to the Ministry of Finance, and since 2004 it has become a joint stock bank. It provides services not only in China, but also abroad – with its own branches in 10 cities of different countries, and in many foreign countries through subsidiary banks, including in Russia. The main areas of work are lending, investment, insurance.
The Agricultural Bank of China 中国 农业 银行
Agricultural Bank of China, the third of the Big Four. It was founded in 1951 and became the very first commercial bank. The bank has branches not only in China, but also abroad, and also has 4 representative offices and 14 subsidiaries around the world.
Bank of China Ltd 中国 银行
The oldest Bank of China, founded in 1912. The last pot from the Big Four. The main areas of activity are commercial banking (private and corporate clients, as well as treasury operations), investment banking and insurance. Plastic cards are also served. In addition to China itself, Bank of China can be found in 53 other countries.
China Life Insurance Company 中国 人寿保险 股份有限公司
Public insurance company founded in 1949. Key areas of activity are life insurance, medical insurance, accident insurance and other insurance services provided to partners.
The largest companies in China: 11-15 places
Huawei Technologies Co. Ltd.华为 技术 有限公司
One of the largest private telecommunications companies in the world. In Russia it is better known for its mobile devices and its own network service, however, in China it is also the largest supplier of wireless networks and equipment.
China Railway Engineering Group 中国 中 铁 股份有限公司
Chinese railway construction company. The prerequisites for its creation appeared back in 1950-1958, but the official date of appearance is in 1990. The most famous projects were carried out in Jordan (metro construction) and Cambodia (high-speed railway).
SAIC Motor Corporation 上海 汽车 集团 股份有限公司 | (上汽 集团)
Automotive company founded in 1997. It accounts for a quarter of all cars purchased in China, as well as a significant share of exported vehicles, including passenger, cargo, sports and multipurpose cars, SUVs and buses. We have already talked about this company in the article “The names of Chinese cars in Russian”.
China Railway Construction Corporation (CRCC) 中国 铁 建 股份有限公司
Another largest construction company in China. The company was founded in 1948. Business profile: transport infrastructure, logistics and residential real estate. The scope of activities also includes equipment manufacturing, exploration, design and consulting. In addition to performing work on the territory of the PRC, CRCC also carries out overseas contracts in Africa.
China National Offshore Oil Corporation 中国 海洋 石油 集团 有限公司
Another oil company, the third largest in China. Field of activity: production, processing and marketing of not only oil, but also natural gas. State-owned company-monopoly in the field of offshore mining.
The largest companies in China: 16-20 places
China Mobile Limited 中国 移动 有限公司
Telecommunication company providing communication services. It can rightfully be considered one of the largest cellular operators in the world (by the number of subscribers). Serves all of China, providing not only mobile communication services, but also broadband Internet.
Pacific Construction Group 太平洋 建设 集团
The 17th place is occupied by a large construction company specializing in infrastructure facilities – roads, bridges, ports and industrial facilities.
China Communications Construction Company
中国 交通 建设 集团 有限公司
State corporation, the basis of which is the construction of transport infrastructure. The company is represented in 139 countries, but most of the contracts are executed in China. Has 30 subsidiaries.
China Resources (Holdings) Company Ltd.华润 (集团) 有限公司
A multidisciplinary conglomerate that includes:
- supermarket chain and the largest Chinese brewing company;
- energy and coal assets in 12 provinces in China;
- real estate developer and operator with assets in 14 cities;
- a cement and concrete manufacturing company;
- gas distributor in large cities;
- ethanol manufacturing company;
- chain of stores Chinese Arts & Crafts;
- a monopoly importer of meat to Hong Kong.
First Automobile Works 第一 汽车 制造厂
The oldest car manufacturer in China, it is a state-owned corporation. FAW independently produces 6 main categories of vehicles: SUVs, buses, cars and small cars, as well as light, medium and heavy trucks. There are joint ventures with Ford, Mazda, Volkswagen, Toyota, as well as with a number of European companies.
The largest companies in China: 21-25 places
China Post Group 中国 邮政 集团 有限公司
National Postal Service of China, founded in 1997. The company ranks 21st in the ranking of the largest companies in China. Serves the whole country, except for Hong Kong and Macau, and also provides international mail and parcel delivery.
Amer International Group 正 威 国际 集团
The metals and electronics company, founded in 1995, has significantly improved its market position over the past few years. Four headquarters of the conglomerate are located in China, three more – abroad, in Los Angeles, Singapore and Geneva.
China Minmetals 中国 五矿 集团 有限公司
The 23rd line is occupied by a state-owned company engaged in the trading of metals and raw materials. Its influence extends not only to China, but also to 34 countries and regions. It is a part of the UN Global Compact’s LEAD.
Dongfeng Motor Corporation 东风 汽车 集团 有限公司
The largest car manufacturer in China, specializing in the creation of commercial vehicles, cars, automotive equipment and parts. In Russia it is represented under the DFM brand.
JD.com, Jingdong Mall 京东 大 网
The 25th place in the ranking is occupied by a company engaged in Internet commerce. Founded in 1998, today it ranks 4th in China in the field of cloud technologies, it is engaged in trade not only domestically, but also abroad. The main activity is the sale of electronics.
The largest companies in China: 26-30 places
China Southern Power Grid 中国 南方 电网 有限 责任 公司
One of the two largest state-owned enterprises in the energy sector. Provides transmission, transformation and distribution of electricity in the 5 southern provinces of China, and is also responsible for construction and energy investment.
Hengli Group 恒力 集团
An international company, founded in 1994, specializing in petrochemicals and refining, the development of polyester materials and textiles. Rapid development, advanced technologies and a high level of responsibility give the company a chance to become the leaders in the Chinese market.
China Energy Investment Corporation 国家 能源 投资 集团
The 28th largest state-owned energy and mining company in China. The company was established at the end of 2017 by merging the assets of the two largest enterprises in their fields. The core business is coal mining and processing.
Sinochem Group 中国 中 化 集团 有限公司
State multinational conglomerate, the core of which is the petrochemical industry. The company was founded in 1970. Now he is engaged not only in agriculture, but also in energy, chemistry, real estate and financial services.
China Baowu Steel Group Corporation Limited 中国 中 钢铁 集团 有限公司
Ranked 30th largest steel company in China and second largest in the world. It was originally founded in 1978. Now let’s get back to the Chinese stock market.
Stock Markets in China Today: State of the Art
China’s stock markets are now clearly segmented. There are several types of shares in circulation:
- Type “A”. Corresponds to common shares in other countries of the world. Make up most of the turnover of stock exchanges. Free purchase of shares is available to Chinese citizens and qualified foreign investors, according to a quota.
- Type “B”. They give the same rights and obligations as type “A”, but such shares can be freely purchased by non-residents of the PRC. On the Shanghai Stock Exchange, B shares are traded in US dollars, and on the Shenzhen Stock Exchange, in Hong Kong dollars.
- Type “C”. Only legal entities can own such shares. It is these shares that are included in the controlling stake owned by the state. Since 2002, the acquisition of C shares has been allowed for foreign investors.
- Types “H” (Hong Kong Stock Exchange), “N” (New York Stock Exchange) and “L” (London Stock Exchange). These shares can only be bought and sold by non-residents of the PRC.
- “Red chips”. These are shares of companies registered in Hong Kong, but with main assets on the mainland.
Stock Markets in China Today: Major Stock Exchanges
Another feature of the Chinese stock market is the two large stock exchanges (in Shanghai and Shenzhen), where the main trading of shares is carried out. There are other sites, but their turnover is much lower. At the same time, simultaneous listing on two large exchanges is prohibited – trading is conducted either in Shanghai or in Shenzhen. The existing restrictions hinder the development of the stock market, but they are dictated by the government’s desire to maintain control over this segment.
The third feature of the Chinese exchange is that private individuals predominate among domestic investors, their share is 88%. Management companies, pension funds, insurance companies and mutual funds only own 4% of the shares. The rest is accounted for by other legal entities.
To stabilize the stock market and its further development, it is necessary to increase the presence of local investment companies. But, despite the stable growth of their capitalization, in the coming years their share in the auctions will not increase much.
Another challenge is transforming state-owned enterprises. The goal is to work according to western corporate standards. This will be another disciplining factor that will improve the performance of the PRC stock exchange.
Shanghai Stock Exchange is the most important regulator of China’s economic development
It is the largest exchange in mainland China. It was opened in 1990 and is managed by the Securities Commission. On this site, shares of type “A” and “B” are traded. Foreign investors have the right to trade securities of more than 500 Chinese companies, but only through partners from the Hong Kong exchange. The market capitalization of the Shanghai site is more than $ 4 trillion.
Two indices are formed on the floor, Shanghai Composite and Shanghai 50. The last index includes the indicators of the 50 largest stocks. The Shanghai Stock Exchange has the most stringent requirements for companies applying for listing. Special attention is paid to the legality of companies, therefore, a full package of relevant documents must be attached to the application. At least 25% of the company’s shares are placed, but with a turnover of more than 400 million yuan, the percentage is reduced to 15%.
The Shanghai Stock Exchange is one of the youngest, but it is developing rapidly, so the growth in the value of securities can reach 10-100% per year. Trading rules are clear and transparent, capital is easy to withdraw – this makes the site attractive for long-term investments and short-term trading.
Stock markets in China today and the exchange rate of the yuan against the dollar
Since the early 2000s, the PRC government has been pursuing a gradual, smooth, but confident policy regarding the national currency. The plans are to bring China to a leading position. By 2030, they plan to create an international financial center, and they want to turn the yuan into the main currency. Although at the moment the rate is 6.71 yuan to 1 US dollar. The plans of Chinese financiers are hampered by political events and the coronavirus epidemic, but China has repeatedly proved its ability to quickly recover from any shocks.
Despite the youth of the PRC’s stock system, its instability and the presence of restrictions for foreign participants, the development of China’s stock exchanges is proceeding at a rapid pace. This is facilitated by the gradual liberalization of the country’s financial policy, its strong position in the export sphere. The trade war with the United States, political conflicts and the coronavirus epidemic have weakened China’s position, but will not slow down the implementation of its plans too much. Looking at the largest companies in China, we can confidently conclude that the development of public and private manufacturing and service enterprises is moving at a steady pace.