China’s stock market is the second largest market in the world after the US, with a total size of which is 11 trillion dollars (about 850 lakh crore rupees). But for the last several years, it has become a big problem for the whole world. From China’s government to America, all are upset with this stock market. This market has not only created a problem for Chinese investors, but it is also affecting the world’s big economies. But, what is the reason that people are upset with the stock market of China? Come, let’s consider it in detail.
Why did China’s stock market cause trouble?
Actually, China’s stock market has not been beneficial for investors since the beginning. Many years ago, investors suffered heavy losses when there was a very large bubble in the market. And this disadvantage scared people so much that now they have started avoiding investing in the stock market. Due to this, the people of China are trying to save more and more money, are reducing the expenditure, and this is also affecting their economic activities.
According to a report by Bloomberg, if a person would have put $ 10,000 in the US S&P 500 index 10 years ago, then today his amount would have been more than three times. At the same time, if someone had set up the same money in the CSI 300, China’s stock market, then he would have barely benefited by $ 3,000. This difference clearly exposes the weakness of the Chinese stock market.
China’s stock market is currently being considered as ‘hell’ for investors. Professor Liu Jigg of China University says that China’s capital market has not been beneficial for investors for a long time. Especially the methods and wrong rules of government companies shared shares have caused heavy losses to investors. Apart from this, the rules and policies of the government have always been in favor of raising money, not for the benefit of investors.
IPO fraudulent pauper
There has been a huge increase in the number of IPO (initial public proposals) in China. In 2022, China became the world’s largest IPO market, but a lot of problems came out for investors here. Many times the share prices of companies fall and they are removed from the market (delisting). This is the reason that people investing in China consider it as a ‘landmine’. This means, investing here can be dangerous, because no one knows when any company can fall.
Will the Chinese government be able to solve this problem?
The Chinese government is making many efforts to solve this problem. President Xi Jinping wants domestic expenses to increase in China, so that the economy remains pace and it can achieve 5% growth rate. But the biggest challenge for China is that they also need heavy investment to pursue their technical companies, even if they do not get immediate benefits from these companies.
Many experts say that the situation is improving, but still the interests of investors are not being given priority. Especially, when government companies are listed in the stock market, they do not matter much, because their main objective is to follow the government’s orders, not to protect the interests of shareholders.