The Chinese Stock Market at a Glance
China is the world's second-largest economy — but is its stock market just as large? And why do people say Chinese stocks 'move sharply on a single policy word'?
Shanghai and Shenzhen, two exchanges
Stocks in mainland China are traded largely on two exchanges. One is the Shanghai Stock Exchange, the other is the Shenzhen Stock Exchange.
Shanghai has relatively more large, traditional-industry companies (banks, energy, infrastructure), while Shenzhen has relatively more tech and growth companies. As of the end of 2024, the Shanghai Stock Exchange is a top-tier exchange in size (around No. 3).
Since China's economy is the world's second-largest, its stock market is large too, but as we saw earlier, within a structure where the U.S. accounts for about half of world market cap, China's share is far smaller than that.
Flagship indexes: Shanghai Composite, Shenzhen Composite, CSI 300
There are three indexes that come up often when looking at the Chinese market.
- Shanghai Composite Index — holds a broad range of stocks listed on the Shanghai exchange. When the news says 'the Shanghai index,' it usually means this.
- Shenzhen Composite Index — holds stocks on the Shenzhen exchange. Its weighting in tech and growth stocks is relatively high.
- CSI 300 — an index that combines Shanghai and Shenzhen to hold the 300 largest stocks by market cap. It covers about 60% of mainland China A-share market cap, so it's widely used as an index representing large Chinese stocks.
For reference, in 2024 the CSI 300 rose about +14.7% and the Shanghai Composite about +12.8%. However, since the few years just before were weak, you shouldn't judge a market by a single year's performance.
Index return figures can vary somewhat depending on the tabulation basis and period. The figures here are rough values for the full year of 2024.
A market heavily influenced by policy and regulation
One of the biggest features of the Chinese market is the large influence of government policy and regulation. There have been many cases where stock prices moved sharply on factors like tighter regulation of a specific industry, real estate policy, and changes in foreign-investment rules.
Another thing to know is that 'the share of individual investors is high.' Accordingly, sharp surges and plunges tend to appear depending on sentiment. In fact, in 2015 there was an event where Chinese stocks surged sharply over a short period and then plunged severely.
So if you're interested in the Chinese market, you have to look at the policy environment and volatility together with corporate earnings. This article neither recommends nor discourages investing in China; it's about understanding why this market's character differs from others.
Frequently Asked Questions
Q. China is the world's second-largest economy, so why isn't its stock market share just as large?
The size of an economy (GDP) and the size of a stock market (market cap) are separate. The value of listed companies, foreign accessibility, and market maturity determine market cap. China's economy is large, but it differs from the U.S. in capital-market openness and maturity, so its market-cap share is relatively small.
Q. Can foreigners invest in mainland stocks (A-shares) too?
In the past, mainland A-shares were close to being for domestic residents only, but now foreigners can access them through mechanisms like the Hong Kong-linked 'Stock Connect.' That said, there are still rules and procedures, and it differs in character from Hong Kong-listed Chinese stocks (H-shares). We'll cover this difference in more detail in a separate article.
Related pages
📋 Results are based on historical data; past returns do not guarantee future returns.
📋 This service is provided for educational purposes to help you understand investing, not as investment advice.