After 'Black Monday' - Time to take stock
- By Heiko Khoo
0 Comment(s)
Print
E-mail China.org.cn, August 26, 2015
The China Securities Regulatory Commission (CRSC) took central control over the exchanges, the market press, listings and administrative controls. However, there were attempts to sell a percentage of non-tradable shares in order to raise revenue for state spending. This hit the value of A-shares as greater supplies were issued without increased demand. In the early 2000s the state intervened to prop-up the market and proposed measures to draw in foreign capital.
Formally, all the institutions, organizations, administrative and legal forms replicate those of Western stock markets. However, despite appearances, all aspects of the capital markets remain owned by some agency of the state.
There is also a common misconception that foreign investors are somehow present in the Chinese stock market and can therefore influence it, benefit from it, or incur losses from the latest movements. This is totally wrong.
China has indeed received a total of over 2.3 trillion foreign investments but this was directed to subsidiaries of Western companies. 80 percent of such subsidiaries belong to Western companies. The remaining 20 percent are joint ventures with Chinese companies but their stocks don't trade at all. These are direct investments that are reflected in balance of payments and in the investment position accordingly.
China's stock market has always been closed to foreign investors. I've selected the 250 largest Chinese companies and banks that publish public reports and are present in the market ranked by their rates of return. The official share ownership structure represents about 75-78 percent of companies' capitalization. Of this 99 percent of ownership is held by Chinese (including Hong Kong and Taiwanese) companies; Norway comes third (0.27 percent), followed by Singapore (0.22 percent), and the USA is only represented by 0.11 percent. The holdings of the rest of the world do not exceed 0.4 percent of the shares.
The main holders of the Chinese stock market are Chinese state-owned entities of one form or another. These include investment companies and corporations. The only Americanized company is BlackRock Asset Management North Asia Limited - the Asian subsidiary of America's BlackRock in Hong Kong. The second biggest holders of stock are various national Chinese social funds, and the third biggest are government institutions such as the Ministry of Finance of the People's Republic of China, etc. Investment companies of different types and calibres comprise a maximum 7 percent of the declared share ownership structure and individual investors represent just 2.2 percent.
Go to Forum >>0 Comment(s)