Money For the Rest of Us

From Boom to Bust: Why China's Stocks Lagged Behind Its Economy and Where to Invest Next

Aug 23, 2023

The podcast discusses the underperformance of China's stock market compared to its strong economy. It explores the factors contributing to this, including economic and governance issues, and highlights the potential for future investment opportunities in emerging markets. The podcast also touches on the impact of health care on China's economy, the current state of the stock market, and the challenges and opportunities in investing in India's technology sector.

28:30

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Quick takeaways

Despite China's significant economic growth, its stock market has severely underperformed over the past 30 years due to lackluster earnings growth.

China's stock market faces challenges from state-owned enterprises, lack of transparency, and slowing demographics, but it still has potential for development.

Deep dives

China's stock market underperformance

Despite China's significant economic growth, the Chinese stock market has severely underperformed, with annualized returns of less than 1% over the past 30 years. This is surprising considering the 42-fold increase in China's GDP and the stock market's growth from less than $100 billion to $12 trillion in market capitalization.

Introduction

3min

The Size and Performance of the Chinese Stock Market

5min

Economic Reforms in China: A Historical Overview

7min

The Impact of Health Care on China's Economy and Stock Market

4min

China's Stock Market and Economic Outlook

8min

India's Demographics, Investing Opportunities, and China's Underperformance

4min

How badly has China's stock market performed except for one remarkable decade
What are the economic and governance factors that contributed to the underperformance
Why it's too soon to write off China despite the structural headwinds
What are the factors that contribute to economic growth and a robust stock market, and which emerging market countries display those factors
What are some ETFs to invest in countries with favorable economic tailwinds

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Show Notes

State-Owned Enterprises Going Public: The Case of China by Xiaozu Wang, et al.—SSRN

A Model of China's State Capitalism by Xi Li, et al.—SSRN

Has China given up on state-owned enterprise reform? by Nicholas Borst—The Interpreter

China Regulator’s New Slogan Fuels Buying Spree in State Firms by Bloomberg News—Bloomberg

Investors sour on Beijing’s bid to boost state-owned enterprises by Sun Yu—The Financial Times