The View | China’s A-share market reforms have begun and investor interest is growing, so get ready to catch the wave
- China has work to do to earn international investors’ trust and produce greater returns, but its size and the interest it already generates suggest it will shake the world over the next decade
China has the world’s second-largest stock market but foreign ownership amounts to less than 3.5 per cent. Usually, when Hong Kong and foreign investors talk Chinese stocks, they’re not referring to those on the Shanghai and Shenzhen stock exchanges, but companies listed outside the mainland – primarily Hong Kong and New York.
For decades, investors in Hong Kong and overseas were kept away from the onshore market, known as the “A” share market, by foreign exchange controls, regulatory hurdles and worries about mainland corporate-governance standards.
But recently, an internationalisation process began that should raise foreign ownership of A shares to the 15-20 per cent level in the next 10-15 years.
This market ranks No 2 globally and No 1 in Asia in terms of market capitalisation (about US$7.6 trillion) and volume of trading, with daily turnover typically six to eight times Hong Kong’s. China is projected to become the world’s largest economy by 2030 to 2035, offering attractive investment opportunities, particularly in companies listed domestically that specialise in the digital economy, consumer products, health care, education and travel.
