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Over the past few years, the market capitalization of U.S. companies has staggeringly approached half of the world's total market capitalization, while the market capitalization of Chinese companies has fallen from 20% of the world's total market capitalization to only about 10%. That's a shameful statistic. According to statistics from Nikkei Chinese, as of February 2, 2024, the total market value of U.S. companies reached a staggering $51 trillion, an increase of 1 percent from the end of last year4 trillion US dollars, accounting for 48 percent of the world's total market capitalization1%。By contrast, the share of China A-shares and Hong Kong** in total global market capitalization fell to around 10% from a peak of 20% in June 2015. This is a truly shocking statistic. At the same time, this also directly reflects the change in the wealth of shareholders. Over the years, the wealth of Chinese investors has been shrinking, and despite the economic development, the wealth of shareholders has not grown in tandem. So, what exactly is causing this phenomenon?
First of all, there is no doubt that the continuous issuance of new shares and the huge amount of financing are objective facts that cause this phenomenon. In recent years, the issuance of A-share new shares has been very fast, with hundreds of new shares listed every year, and the amount of financing has always ranked first in the world. Even in the context of such an economic downturn in 2023, a total of 313 new A-share listings were listed, raising a whopping 356.4 billion yuan. The large number of new shares issued and the increase in the amount of financing have led to the majority of the funds flowing into the pockets of major shareholders. Coupled with the violation of major shareholders, the refinancing of restricted shares and the phenomenon of selling immediately after listing, the wealth of the majority of small and medium-sized shareholders has been ruthlessly harvested. This means that the wealth of small and medium-sized shareholders is transferred to the pockets of major shareholders and institutional investors. That's why so many companies like to go public? Why would you rather queue for years to go public? Why should it be listed even if financial fraud is involved? Herein lies the reason. Listing means high premiums and high liquidity, which can benefit from it, sell the company, and absorb the wealth of the majority of small and medium-sized shareholders. This practice leads to a natural decline in the market capitalization of ***. That's one of the reasons.
*Differences in structure are also one of the reasons for this phenomenon. This is evident in the top 10 market capitalization** categories in A-shares and U.S. stocks. The top 10 U.S. stocks by market capitalization** are mainly dominated by technology companies such as Microsoft, Apple, Amazon, Nvidia, and Meta. And what about A-shares? The largest market capitalization** is China Mobile, the second is Kweichow Moutai, followed by listed companies in traditional industries such as Industrial and Commercial Bank of China, China Construction Bank, PetroChina, and Agricultural Bank of China. Science and technology represent the future, is the primary productive force, full of vitality. Traditional industries such as telecommunications, liquor, banking, and energy have limited growth potential, and the ceiling is also very obvious. Therefore, it is reasonable for the United States to continue to rise.
Another indisputable fact is that the gap between the economies of China and the United States is widening. In 2023, China's total economic output will be about 126 trillion yuan, or about 17$75 trillion; And the total economic output of the United States reached 27$37 trillion. This means that China's share of US GDP is about 65 percent, up from about 77 percent two years ago. In other words, in two years, China's share of the overall global economy has fallen by 12 percentage points. The widening of the gap between the economies of China and the United States will inevitably lead to the widening of the gap in market capitalization. That's the third point.
To sum up, A-shares and Hong Kong stocks do need to think deeply and work hard, otherwise the gap will become wider and wider. After all, market capitalization represents the vitality and strength of a country's or region's economy. To change this situation, we need to pay attention to the development of the technology industry, promote innovation and optimize the industrial structure; At the same time, it is also necessary to gradually expand the size of the economy and improve the quality and efficiency of economic growth. Only through such efforts will we be able to narrow the economic gap with the United States and other countries and achieve sustained and healthy economic development.
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