What Are the Indicators for China’s Stock Market?

China has a wealth of investment potential for hungry investors looking for great opportunities. If you’re interested in the country’s economy, consider tracking many of its stock market indexes from Shanghai, Beijing, Hong Kong, Shenzhen, and Taiwan. You can look at some of the key indicators we discuss below when evaluating the Chinese stock market along with certain resources from which to obtain information on the markets.

Key Takeaways

• Investors who want to follow the Chinese stock market and economy can track stock market indexes in Hong Kong, Shanghai, Shenzhen, and Taiwan.
• Analysts also check figures released periodically for a glimpse of the overall state of China’s economy.
• Although the country is the world’s largest exporter and the second-largest economy, it is still an emerging market.

Evaluating China’s Stock Markets

It is crucial to note that China’s stock markets do not operate in a vacuum. As they operate in China, which operates with state control, the Chinese government’s relationships with its own businesses and with the United States can change at any time.

The Chinese government is waging a regulatory crackdown on its own companies, particularly on its Internet companies. These include anti-monopoly measures that could affect the growth of companies like Alibaba as well as data privacy measures that could crush the growth of all of its Internet companies. The privacy measures are aimed at preventing personal data from being transferred abroad.

Due to the decline in China’s economy, experts believe the country needs significant structural changes to stem the economic bleeding. Particular areas that need to be addressed include the real estate sector, the country’s large debt load, and a decline in exports.

Note

China’s gross domestic product (GDP) for 2023 was $17.79 trillion after that of the U.S., which was $27.72 trillion.

Hang Seng Index (HSI)

The Hang Seng Index (HSI) is the benchmark stock market index for the Hong Kong financial world and is widely followed as a proxy for the Asian markets in general. It is a weighted index of the largest companies that trade on the Hong Kong Exchange, covering approximately 65% of its total market capitalization.

This index is a benchmark for blue-chip stocks and reflects the performance of the leaders of the Hong Kong exchange. The HSI securities are separated into four sectors: finance, utilities, properties, and commerce and industry sub-indexes.

The Hang Seng Index was created in 1969. It is published by a wholly-owned subsidiary of Hang Seng Bank.

Note

The Hang Seng Index increased by 17.7% in 2024. The Shanghai Composite Index gained 12.8% in the same period.

Shanghai Stock Exchange Composite Index (SSE)

The Shanghai Stock Exchange (SSE) Composite Index, which is often called the SSI Index, tracks all stocks traded on the Shanghai Stock Exchange. It is a weighted index calculated from a base period of 100.

Launched on July 15, 1991, the index has a reputation for volatility, but its performance, like China’s growth, has calmed in recent years.

Shanghai Shenzhen CSI 300 Index (CSI300)

The Shanghai Shenzhen CSI 300 Index is designed to replicate the performance of the top 300 stocks traded in the Shanghai and Shenzhen stock exchanges and is weighted for market capitalization. As such, it is seen as a blue-chip index for mainland Chinese stocks.

The CSI 300 is considered the blue-chip index for mainland China stock exchanges, as it tracks both the Shanghai and the Shenzhen markets.

Introduced in 2005, the index is managed by China Securities Index Co., Ltd., which maintains over 7,000 indexes in 16 countries and regions around the world.

SZSE Composite Index

The Shenzhen Exchange is one of three stock exchanges operating in mainland China, the others being in Beijing and Shanghai. The SZSE Composite Index is the main market index of the Shenzhen Stock Exchange.

It may be less well known outside China than the others, but Shenzhen is one of the largest stock markets in the world by market capitalization. Its listings are dominated by the stocks of companies that are controlled by the government.

Taiwan Capitalization Weighted Stock Index

The Taiwan Capitalization Weighted Stock Index is an indicator comprised of stocks traded on the Taiwan Stock Exchange, weighted for market capitalization.

The index covers all of the listed stocks excluding preferred stocks, full-delivery stocks, and newly listed stocks. The highest-weighted stocks naturally have the most significant effect on the reading of the entire index.

This index was first published in 1967.

Important

In January 2024, the market capitalization of India’s stock exchanges surpassed that of Hong Kong’s for the first time, making India the fourth-largest equities market in the world.

Evaluating China’s Economy

It’s rare for an economy to grow as fast as China has since the 1980s when it first began to build a unique hybrid state that allows a free market economy to operate within a communist system. Although it’s still considered an emerging market, it is the world’s largest exporter and the second-largest economy after the United States.

Economic growth is projected to be 5% in 2025 even with trade talks remaining unchanged between the Asian nation and the United States. Both countries took a tough stance promising to impose strict tariffs on each other in what appeared to be a major trade war.

You can find useful information about the state of the Chinese economy from the Organization for Economic Cooperation and Development (OECD), the World Bank, or the International Monetary Fund (IMF). Or, they can check the numbers released by China’s National Bureau of Statistics, though some say those numbers are highly suspect.

National Bureau of Statistics of China

Analysts attempting to track China’s economy routinely study figures released by China’s National Bureau of Statistics.

The bureau is responsible for the collection, investigation, research, and publication of statistics about China’s economy. It measures GDP through three sectors: agriculture, construction, and manufacturing and services.

It may be wise to take these numbers with a grain of salt. The Diplomat, a current affairs magazine for the Asia-Pacific region, states flatly that the Chinese government’s GDP numbers are inflated.

All of the statistics compiled by the bureau are published on its website, including monthly, quarterly, and annual data.

The Organisation for Economic Co-operation and Development (OECD)

The OECD is an international nonprofit group that provides a monthly Composite Leading Indicator for China’s economy, designed to provide indications about the nation’s economic growth.

The OECD also publishes data specific to China on a wide range of topics including agriculture, development, economy, education, energy, environment, finance, government, health, innovation and technology, jobs, and society.

What Is the Main Chinese Stock Index?

The most widely quoted indexes in American financial media are probably the Hang Seng Index (HSI), which tracks the Hong Kong Stock Market, and the CSI 300 Index (CSI300), which tracks 300 blue-chip stocks based in mainland China.

Can I Invest in the Chinese Stock Market?

There are at least four ways an American can invest in Chinese stocks:

• Buy American Depositary Receipts (ADRs). An ADR is a negotiable certificate that represents one or multiple shares in a foreign company like retail giant Alibaba (BABA).
• Invest in an exchange-traded fund (ETF) that focuses on Chinese stocks, like the Franklin FTSE China ETF (FLCH), SPDR S&P China ETF (GXC), or the Invesco Golden Dragon China ETF (PGJ).
• Use an online or real-world brokerage firm to access stocks listed in mainland China and Hong Kong. Known as H-shares, they are readily accessible to international investors through brokers like Charles Schwab and Fidelity.
• Invest in a mutual fund that invests in Chinese stocks.

Can Chinese Citizens Buy U.S. Stocks?

This is getting difficult. A new data privacy law implemented by China in 2021 regulates the export of private data from China to any other country. Its restrictions are making it difficult for Chinese online brokers (and many other Chinese businesses) to do business with foreigners.

The Bottom Line

China’s growth has slowed but is still impressive. Concerns about investing in China remain, particularly around its lack of openness and the state’s control over its economy, which could change regulations at any time and leave foreign investors in the lurch. One concern is its slowing growth rates, which have been declining since 2007.

This is enough to give any investor second thoughts about dabbling in the Chinese stock market, but it may not be enough to dissuade them from a more indirect approach, such as investing in an ETF or mutual fund that tracks China’s business successes.