The Shanghai Stock Exchange in China

At the end of 2016, the Shanghai Stock Exchange ranked third among global stock exchanges in terms of market capitalization. It also dropped to sixth place at the beginning of this year as stocks around the world plunged. But it has since climbed back up again. With so much attention on the Shanghai exchange, whether positive or negative, it’s worth getting to know it a little better. Here are six things you might not have known about China’s stock market and its largest exchange home to almost two-thirds of listed companies within the country.

China’s Stock Exchanges

Before we take a closer look at the Shanghai Stock Exchange, let’s take a quick look at the other exchanges in China. The Shenzhen Stock Exchange, China’s second-largest, is the only exchange in the country where companies are allowed to list without an initial public offering (IPO). As a result, the Shenzhen exchange is home to a whole range of “unicorn” tech start-ups that have been able to skip the IPO process altogether. The Hong Kong Stock Exchange is also worth keeping an eye on. It’s the largest exchange in the world outside mainland China and has been a major source of capital for Chinese companies for many years.

Market basics

There’s no denying that the Shanghai Stock Exchange has seen some dramatic swings in recent years. In 2015, the index jumped almost 50%, then fell a whopping 40% the following year. It then rose again by about 15% in 2017, before dropping about 25% in 2018. And then, in the first four months of this year, the index rose by 40%. And as you can see from the graph below, the swings got even more dramatic in recent years. The index has also been getting more attention as the exchange has become bigger and more important. It now has a market capitalization of more than $6 trillion which is more than half of China’s GDP. It’s also now home to more than 1,800 listed companies, including giants like PetroChina, Tencent, and Alibaba.

IPO rush in China

China’s stock exchanges have been the world’s busiest bourses in recent years. The Shanghai exchange is now the most active stock market in the world when it comes to IPOs. There were two IPOs listed on the exchange every week during the first two months of this year. That’s more than double the amount listed on all other developed markets combined. There’s been a big rush to list on the Chinese stock exchange for a few reasons. First, the exchange has a relatively low entry barrier. Even smaller companies are allowed to list on the exchange. And second, the exchange is open to foreign investors which have helped the exchange grow in importance.

Exchange merger to come?

There’s always been a lot of attention on the Shanghai Stock Exchange, but this has increased in recent months. That’s because there are now rumors swirling that the Shanghai Stock Exchange and the Shenzhen Stock Exchange will soon merge. If this happens, it would create the world’s second-largest stock exchange behind the New York Stock Exchange. It would also mean that the Shanghai exchange would become home to many of the tech unicorns in Shenzhen. But what’s behind the rumors? Well, the vice president of the Shanghai Stock Exchange is on record as saying that a merger is a priority for the exchange. And the government has also been pushing for greater exchange integration in general.

Biggest companies in China

If you look through the top 10 companies listed on the Shanghai Stock Exchange, you’ll find that most of them are state-owned enterprises (SOEs). There are only two purely private-sector companies in the top 10, and the only one that’s not a heavy industry company. That’s worth remembering if you’re thinking of investing in the Shanghai exchange. You’ll likely be heavily exposed to the fortunes of large, state-controlled companies. These companies make up around two-thirds of the Shanghai exchange. And while they can be useful to watch, they can also make it difficult to gauge the overall health of the exchange.

Investors point fingers at market manipulation

As we’ve seen, the Shanghai Stock Exchange has certainly seen its share of ups and downs. But in some ways, the exchange has become a victim of its success. That’s because some market watchers claim that the exchange has been subject to manipulation. That’s when traders work together to drive prices up or down for their interests whether financial or political. They do this by flooding the market with fake orders that are designed to influence the price. And it appears that these fake orders are being used to create a bullish market and therefore attract investors. But there’s an important difference between this kind of price manipulation and the kind of stock manipulation that led to the 1929 market crash.


The Shanghai Stock Exchange has come a long way since its creation in the 1990s. And it has certainly been a rollercoaster ride for investors since then. That said, the exchange is now bigger than ever, and is playing an increasingly important role in the global economy. And as long as you understand the risks, it could be a great place to invest your money.