What Is the Shanghai Stock Exchange?

John Lister

The Shanghai Stock Exchange a stock exchange, one of two that operate independently of one another in mainland China. The other is the Shenzen Stock Exchange. The Shanghai Stock Exchange is dominated by domestic stocks, with tight restrictions on listings by foreign companies. As of December 2010, it was the fifth largest exchange in the world based on market capitalization, which is the total value of all stocks in all companies listed on the exchange.

A map of China.
A map of China.

Although China has lists of stock prices as far back as 1866, the roots of the Shanghai Stock Exchange date back to 1891 with the establishment of the Shanghai Sharebrokers Association, the first true exchange in the company. The association was later renamed the Shanghai Stock Exchange in 1904, and it went on to take over two other Shanghai-based exchanges in the early 1920s. The exchange was closed between 1941 and 1946 during Japanese occupation, and from 1949 to 1990 as a result of the more economically controlled periods of Communist rule.

The Shanghai Stock Exchange, which can be dated back to 1891, is primarily composed of domestic stocks.
The Shanghai Stock Exchange, which can be dated back to 1891, is primarily composed of domestic stocks.

There are two different classes of stocks on the Shanghai Stock Exchange. A-class stocks are priced in the Chinese currency of the renminibi yuan. B-class stocks are priced in US Dollars (USD). Originally, foreign investors could trade in B-class stocks only. Since 2002, specially approved foreign investors can also invest in A-class stocks, though this approval has been granted only to a limited number of investors, all institutions rather than individuals.

The exchange is overseen by the China Securities Regulatory Commission. This is a particularly powerful regulator; the highest court in China now defers rulings on security law to the commission. The commission was formed in 1992, and in 1998, it received the legal authority to regulate all securities trading in the country.

As of the end of 2009, the Shanghai Stock Exchange had a market capitalization of 18,465 billion renmibi yuan, equivalent to $2.8 trillion USD. By comparison, the market capitalization of the New York Stock Exchange in December 2010 was $13.39 trillion.

As with most stock exchanges, there are specific requirements that must be met if a company is to list on the Shanghai Stock Exchange. The company must have been operating for more than three years. In the past three years it must have been profitable each year and neither engaged in illegal activity not submitted falsified accounts. There is also a minimum share capital of 30 million renminbi yuan, equivalent to around $4.6 million USD.

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