Shanghai Stock Exchange – the Mainland Boards

haring the wealth in China

The creation of China’s first stock exchange in 1891, the Shanghai Share Brokers Association, marked the emergence of Shanghai as an important commercial centre in Asia, and world-wide financial centre. By the 1930s this association had grown immensely, becoming a board on which Chinese and foreign investors regularly traded stocks, futures, and government bonds. Today’s Shanghai Stock Exchange (“SSE”) was re-established in 1990 as a non-profit-making institution governed by China Securities Regulatory Commission. After seventeen years of operation, the SSE has a market capitalisation of around US$ 1.7 trillion and is the leading stock market in Mainland China in terms of number of listed companies, number of shares listed, tradable market value, and total trading value. The SSE compliments Mainland China’s other smaller board, the Shenzhen Stock Exchange. Collectively, the two boards embody the zeitgeist that has been sweeping through the nation since the paramount leader responsible for the opening and economic reform of China, Deng Xiao Ping declared, “To get rich is glorious,” over fifteen years ago. At the time Deng was in Shenzhen, on his Southern Tour to view firsthand the dramatic success and growth of the areas of China first opened to the world, the special economic zones. A mere fishing village until the 1970s, Shenzhen is now home to China’s second largest mainland stock exchange and home of the mainland’s second busiest port, behind Shanghai. The Chinese government’s goal of making Shanghai into the financial capital of Asia is at the forefront of the minds of the decision makers in Beijing, as the government continues to tweak the relevant laws governing the mainland boards to ensure the Shenzhen and Shanghai stock exchanges operate at a truly international level on par with the established Hong Kong exchange board.

In looking to ensure Chinese citizens can benefit directly from home grown companies and share in their wealth and success, the government is taking a wide variety of measures to encourage local companies to list at home. These adjustments began in 2004 when China launched a second board in Shenzhen to accommodate small and mediumsized businesses. Recently, the government announced that a stock exchange with less stringent listing requirements, modelled after Hong Kong’s Growth Enterprise Market or the New York based NASDAQ, is going to offer private equity investors and others a way to invest in start-up ventures. This platform is planned to commence trading sometime in 2008, and the word is that there are all ready approximately 1000 domestic enterprises queuing up to get onboard.

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