Part of the reason, long-term China watchers say, is structural. Created 35 years ago as a way for state-owned enterprises to channel household savings into building roads, ports and factories, exchanges have lacked a strong focus on delivering returns to investors. That skew has spawned a host of problems from an oversupply of shares to questionable post-listing practices, which continue to weigh on the US$11 trillion market.
At the heart of why consumers in China save so much and spend so little, and why Xi Jinping and Donald Trump will struggle to change that behaviour even if they want to, lies the country’s stock market.
Even after a recent rally, Chinese indexes have only just returned to levels seen in the aftermath of a dramatic bubble burst a decade ago. Instead of incentivising consumers to spend, poor equity returns have nudged them toward saving. A US$10,000 investment in the S&P 500 Index a decade ago would now have more than tripled in value, while the same amount in China’s CSI 300 benchmark would’ve added just around US$3,000.
