Our market has great prospects. China has almost the highest savings rate in the world. Even calculated at the current exchange rate, China’s total annual savings is about 4 trillion US dollars, far ahead of other countries. The demand of residents and corporate sector for investment and wealth management is extremely booming. Thus the potential supply of financial resources in the market is sufficient. Meanwhile, in China over 13 million incorporated enterprises, more than 40 million self-employment businesses, and a great deal of innovative and startup activities need to raise funds in the capital market.
However, we are also fully aware that, our market is still rather immature. It is still essentially an emerging market in a transitional period. The reasons are as follows:
First, market structure is unbalanced. The bond market is significantly lagging behind the equities market, but the equities market is also not diversified. The futures and derivatives market is underdeveloped as well.
Second, valuation in the equities market is unreasonable. High quality of blue-chip companies are not reflected by high P/E ratio. SME shares have a premium of 50% to their nominal value on average.
Third, share holding structure of listed companies is rather unique. A large percentage of listed companies are state-owned or family-owned. State-owned shareholders take up over 57.8% of capital stock in the market, and single largest shareholders of listed companies hold 37% of the shares on average. It is common to see a single largest shareholder that dominates a listed company.
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