History of the Shanghai Stock Exchange

Published: 23rd October 2011
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The Shanghai Stock Exchange is now one of the biggest in the world and is growing all the time. It has an interesting history which has included it being halted during World War 2 and it being suspended for over forty years after the communist revolution.

The first stocks were traded in Shanghai in 1866, but it was events two decades later that was really the beginnings of a stock market in the city. In the late 1880’s the Chinese mining industry boomed, something that was further boosted by mining stocks being launched by provincial governments. The Shanghai Sharebrokers Associations was established in 1891 by foreign businessmen, and this became China’s first stock exchange of sorts. This mostly dealt with the stocks of local companies.

Between 1889 and 1891 there was a boom in real estate companies, and in 1910 a boom in rubber plantations. The wave of confidence in these areas was partly due to cheap credit being offered by banks, something that eventually ended in bust.

The Shanghai Stock Exchange did not open until 1929. At the beginning of the 1920’s the Shanghai Securities and Commodities Exchange (1920) and the Shanghai Chinese Merchant Exchange (1921) were both established. During this time over 140 stock exchanges started up in Shanghai, all but twelve of which had disappeared by 1922. In 1929 the Shanghai Securities and Commodities Exchange and the Shanghai Chinese Merchant Exchange combined to officially form the Shanghai Stock Exchange. Rubber was the prime stock and foreign companies, especially Japanese companies, started to take control of the stock exchange.

By the 1930’s the Shanghai Stock Exchange had become the financial centre for the region and was trading in stocks, shares, government bonds and futures.

The Shanghai Stock Exchange ceased operation during World War 2. In 1941 Japan invaded and the stock exchange closed down. When the war ended it opened again but only for a short period. When the communist revolution took place in 1949 the stock exchange was again closed and remained so for forty-one years.

There was no trading in stocks in China for over two decades until the cultural revolution of the 1970’s. Initially this was only open to the Chinese, with it opened to foreign investors from 1978. Companies began to trade securities with foreign firms and this caused a surge in the economy. The modern Shanghai Stock Exchange was eventually opened in 1990, forty-one years after it was closed during the Communist Revolution. Another stock exchange was also opened in Shenzhen, which dealt with technology and government securities.

In 1997 the Hong Kong Stock Exchange was implemented into the Chinese system.

The Shanghai Stock Exchange was the sixth biggest in the world in 2010, behind New York, Tokyo, the NASDAQ Stock Exchange, the Euronext Stock Exchange and London. It is run by the China Securities Regulatory Commission as a non-profit organisation and trades in stocks, funds and bonds. It is continuing to grow and could well complete with New York and Tokyo as the world’s biggest over the next few years.

Andrew Marshall ©

Witan Pacific deal in Asian Investment Funds.

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