Walter Hutchens’ Blog

First, only about $6 billion of that $22 billion was raised in Shanghai. That’s a huge sum, but it didn’t come from global capital diverted away from India. Hong Kong, though technically part of China, is outside the great Chinese Currency Wall and has has had substantial stock markets a long time. From what I can tell, Hong Kong has flourished serving Chinese companies just as India’s markets have flourished serving Indian companies.

Second, because of the PRC currency wall, the stock markets in Shanghai and Shenzhen aren’t likely to “compete” with stock markets in India any time soon. Indian investors, except through narrow exceptions such as the QFII program, are not able to invest in China’s stock markets. No overseas company has yet listed in Shenzhen or Shanghai, so there isn’t a meaningful competition among the mainland PRC and Indian exchanges to attract issuers.

I think India’s stock market is promising compared to China’s precisely because it isn’t dominated by government-backed juggernauts like ICBC. China may get more global buzz and attention from foreign investors than India, but it seems like India’s stock markets are functioning as they should—to help promising firms get capital for further expansion, not as a mechanism for bringing private savings into the process of reforming SOEs. Just as the entrepreneurs of Wenzhou are said to have flourished because they were too far away from government support and control, I imagine over the longer term India’s stock markets may be more likely to produce winners (and thereby attract global capital) than China’s policy-driven markets.