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Market value is only very little piece of the booming Chinese economy but it can be an indicator for the trend. Given the most populous country, China will overtake the US as No.1 sooner or later. The only problem is the time.|
But the scale should not be the sole target we pursue.
China has just hit another milestone.
In 2010 China's economy overtook Japan's as the world's second largest economy. This week the country's stock market has finally caught up.
Thanks to a broad decline in the Japanese yen and a major rally in Chinese equities, the total value of China's stock market has finally surpassed Japan's to snatch the number two spot in the world, after the US.
The total value of China's equity market in US dollars finished Wednesday at $4.448tn, just a sliver below the entire value of Japan's market, at $4.507tn, according to data from Bloomberg.
The data is always delayed by a day, but it appears that China's equity market overtook Japan's on Thursday.
China's Shanghai Composite, the most widely used index in China, rose 0.7 per cent in mid-afternoon trading. Japan's Topix, the key index for Japan, finished lower by 1 per cent. Using these indices as broader proxies, and taking into account today's currency moves, China's total market cap has now grown to $4.480tn, while Japan's has slipped to $4.478tn .
The Shanghai market has rallied 24 per cent this year, including a 14.5 per cent gain since late October when investors began to price in the launch of the Shanghai-Hong Kong Connect scheme, which for the first time allows international investors direct access to Shanghai stocks. China's market extended its rally this week after the People's Bank of China surprised markets with its first cut to benchmark interest rates in two years, spurring talk that will Beijing will offer further help as the economy cools.
The Japanese market has been rallying in recent months too, but weakness in the yen has robbed investors buying in dollars. The Topix is up nearly 7 per cent this year, but the yen has tumbled 11.4 per cent. As a result the Topix has fallen 4.1 per cent in US dollar terms.