Global stock markets may be melting at the moment, but in this issue of The Wire, we introduce readers to the world of Chinese listings, publicly traded companies that are a growing part of the stock portfolio of global investors. Since most of the world’s so-called “unicorns,” or startups valued at $1 billion or more, are based in China, many of them will bolster China’s stock listings. But first, let’s take you back in time.

In 1989, there was not a single publicly traded company in mainland China. Today, the country has close to 4,000 listed companies. If you include Hong Kong and Taiwan, Greater China is now home to more listed companies than the United States. Over the past two decades, rapid economic growth in China has helped restructure state-owned enterprises, fueled a startup culture, and led to a wave of Chinese offshore listings, on stock exchanges in Hong Kong, Singapore and even New York. And while the stock markets in mainland China remain deeply flawed — dogged by volatile share prices and poor regulatory oversight — they now matter globally. 

Two years ago, MSCI Inc., the world’s largest stock market index provider, began to include shares from mainland China in its emerging markets index. The move effectively pressed global investment funds to buy stocks in a part of the world they had been partly restricted from accessing before. Here are some of the key metrics behind that rise.

Chinese Exchanges Now Boast More Listings

The number of stock listings in the United States has dipped in recent years, after peaking in the late 1990s. In mainland China, however, listings have grown significantly. Hong Kong also continues to grow, as Chinese entrepreneurs seek offshore listings, allowing them to avoid China’s strict capital controls. In short, Greater China (including Hong Kong and Taiwan) now has more publicly traded companies than any country in the world. China recently passed a new securities law that could streamline the listings process and bring even more companies to market.

Chinese Exchanges Have Quadrupled in Value

The U.S. is still home to the most important and valuable stock market in the world; shares listed on the New York Stock Exchange and Nasdaq were valued at an estimated $36 trillion at the end of last year. But China, with exchanges in Shanghai and Shenzhen, has closed the gap.¹Stock exchange size downplays the global influence of Chinese listings. Hundreds of Chinese companies are listed on Nasdaq and the NYSE, and these companies’ combined market cap tops $1 trillion. The combined market cap of exchanges in Greater China was $14.6 trillion at the end of last year.

IPOs Drive Growth of Chinese Markets

A flourishing venture capital market has helped make China the world leader in initial public offerings of stock. At the time of its New York Stock Exchange listing in 2014, Alibaba was the biggest IPO in history, raising more than $25 billion.²Alibaba’s 2014 IPO was surpassed only by Saudi Aramco’s 2019 offering. China has introduced separate Nasdaq-like boards for technology listings, ChiNext in Shenzhen in 2009 and the STAR Market in Shanghai in 2019, while Nasdaq, the NYSE and Hong Kong continue to compete fiercely for new Chinese listings. 

Individual Companies Have Grown, Too

A stock listing puts a more public market value on a company, and now China can measure its companies against other global firms. According to CapitalIQ, Chinese companies now account for 14 of the top 100 largest companies by market value, led by the Alibaba Group.

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Graphics and design contributed by Hiram Henriquez from Miami.