
China Overtakes Japan as World’s Second-Biggest Stock Market - JacobIrwin
https://www.bloomberg.com/news/2014-11-27/china-surpasses-japan-as-world-s-second-biggest-equity-market.html
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npalli
Here is a scary detail, Japan's stock market capitalization over the last
twenty five years. Look how it keeps cycling around $4 Trillion.

    
    
       Year	Value
       1988	$3,910,000,000,000
       1989	$4,390,000,000,000
       1990	$2,920,000,000,000
       1991	$3,130,000,000,000
       1992	$2,400,000,000,000
       1993	$2,999,760,000,000
       1994	$3,719,910,000,000
       1995	$3,667,290,000,000
       1996	$3,088,850,000,000
       1997	$2,216,700,000,000
       1998	$2,495,760,000,000
       1999	$4,546,940,000,000
       2000	$3,157,220,000,000
       2001	$2,251,810,000,000
       2002	$2,126,080,000,000
       2003	$3,040,660,000,000
       2004	$3,678,260,000,000
       2005	$4,736,510,000,000
       2006	$4,726,270,000,000
       2007	$4,453,470,000,000
       2008	$3,220,490,000,000
       2009	$3,377,890,000,000
       2010	$4,099,590,000,000
       2011	$3,540,680,000,000
       2012	$3,680,980,000,000

~~~
mathattack
A couple things to note on this:

1) Market cap changes of the stock market doesn't tell much. If a company
changes it's capital structure (more or less debt relative to stock, or
Private Buyouts) the market cap changes.

2) A better metric would be "Total value of the equity and debt of all the
companies" with an equity and debt breakout.

3) Even still, this would miss privately held companies. It also would just
measure the asset values, and not ownership.

~~~
npalli
IDK, the original article talked about the stock market. On that exchange,
market capitalization is measured and is a proxy for everything going on with
public companies. What you are talking about in 1) and 2) is some non-existent
market on which total equity and debt with vastly different characteristics is
valued on one shot. What exchange do you have in mind here? The only time you
fully measure all the effects to calculate the enterprise value is when you
are buying the company outright. There are several practical reasons why you
don’t measure and trade on the enterprise value of the listed companies. To
list a few

1.On the equity side you only know the prices of outstanding shares, how will
you value the non-traded shares and options? There is no simple measure to
assign the control premium on a single company much less the entire stock
market. This doesn’t include debt that might convert to equity on different
schedules.

2.On the debt side, debt can be convertible to equity, have different
seniority, payment schedule, liquidity and risk profiles. What does a
consolidated number tell you? Not to mention off-balance sheet commitments and
the fact that debt for some sectors like a financial company might not make
any sense. What does the enterprise value of Bank of America even mean?

3.Even valuing cash has problems if you are like a US tech company with
billions abroad that might be subject to myriad tax rules.

Finally with 3) you talked about private companies, at that point you probably
need to look at SOE in China as well. Now you are looking at total wealth and
not the stock market.

~~~
mathattack
Thank you for your comments/thoughts.

It's very hard to come up with a lot of these numbers. In the US it's possible
to look at the aggregate corporate debt market, but you would still miss some
liabilities. It doesn't change the point, though, which is that aggregate
"public equity only" analysis doesn't tell you much. (Just like looking only
at a company's balance sheet equity doesn't tell you much)

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a_c_s
Given that China's population is 10.8x Japan's, this seems inevitable. Is
there more to this that make it notable that I'm missing?

Source:
[https://www.wolframalpha.com/input/?i=china+population+%2F+j...](https://www.wolframalpha.com/input/?i=china+population+%2F+japan+population)

~~~
lkrubner
By that line of reasoning, India's stock market should be the same size as
China's, and both China and India should have a stock market that is 4 times
bigger than the USA. But that is not going to happen.

~~~
a_c_s
As developing economies 'develop' their per-capita GDP approaches that of
developed economies. Therefore, as this happens, the size of an economy
becomes more proportional to the population size.

Therefore over the very long term that absolutely should happen.

~~~
adventured
Not quite. Your position rests on the premise that China can bring its
population up to developed status (something on par with the US, Britain,
France, Germany, Japan etc), ditto for India. That is very unlikely to be
feasible, given the truly massive manufacturing, consumption, exports, energy,
resources, etc. that it would require to boost China's GDP to ~2x the size of
the entire rest of the world just to bring their median income up to that of
the US.

------
w1ntermute
I wonder if the rest of the Sinosphere will eventually suffer from the same
sort of economic malaise as Japan, once they reach first-world status. They
all have hierarchical cultures that make creative destruction difficult. So
while they can quickly catch up to the West through efficient social
organization, they can't break them down and replace them with something
better.

~~~
dmix
Counter to most western thought, you can in fact have heavy social control but
small-government in terms of economics ala Singapore and have a country make
rapid economic process.

China's CRC can loosen their grip on business, or selectively ignore it often
enough, while still maintaining heavy control of culture and social issues,
while still maintaining high growth rates. As we've seen in the last few
decades.

It didn't seem to stop them previously, why would they try now? Other than
civilian revolt which is non-existent in China.

~~~
w1ntermute
> you can in fact have heavy social control but small-government in terms of
> economics ala Singapore and have a country make rapid economic process.

Singapore's rapid economic progress is due to anything _but_ small government.
If you read Lee Kuan-yew's memoirs, you'll see the lengths to which the
Singaporean government went to kowtow to Western (and later, Japanese)
multinationals. They rolled out the red carpet over and over, for years,
before any of those companies made significant investments in Singapore.

Also, there are several reasons why generalizing the Singaporean experience to
Sinosphere countries doesn't work:

1\. Although Singapore has a lot of ethnic Chinese, the country is inherently
multicultural and has adopted many British cultural traditions and practices.

2\. The country is very small, making social control much easier than in a
country the size of China.

3\. Lee Kuan-yew himself has said that the Chinese government won't be able to
maintain social control as the Chinese population migrates to the cities[0].
The system will have to change, and that will be very difficult.

0:
[https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s](https://www.youtube.com/watch?v=TlkPuamwrlg#t=2m52s)

~~~
dmix
Regarding #3, he said that the reason they can't control people as they move
to cities is to:

a) the use of cellphones/internet spreads information

b) their ability to collectivize and locally share information in high-density
cities

But have you read any recent books on China post-internet? They have largely
succeeded in maintaining control of the peoples perceptions of vast amounts of
issues. They might not be able to stop CNN/Tweets from getting out but they
have an incredibly powerful propoganda machine that makes sure all the
citizens distrust Western dissent.

So even with access people question it and

Second, the government employees a massive '50-cent army' to sway opinion all
over the internet. Thousands of people who endless comment on websites in
highly deceptive ways.

Third, the party co-opts popular influencial youth such as Han-han [0] and
Zhou Xiaoping [1], and makes sure their message is anti-western and pro-state
(with degrees of restraint to make it non-obvious).

Fourth, those cell phones have nothing but helped the Chinese party pick up
and 'disappear' any dissidents.

So I disagree with Lee Kuan-yew that China can not maintain control. They have
and are.

1 out of 3 people in China work for the party, how can they not maintain
control?

[0]
[https://en.wikipedia.org/wiki/Han_Han](https://en.wikipedia.org/wiki/Han_Han)

[1]
[http://www.foreignpolicy.com/articles/2014/10/21/is_this_the...](http://www.foreignpolicy.com/articles/2014/10/21/is_this_the_new_face_of_chinas_silent_majority)

~~~
seanmcdirmid
The government's ability to guide public opinion is quite limited, especially
in the cities with the urban aspiring young who are already quite cynical.
They get their best influence by pushing nationalism buttons, but this doesn't
work very well for domestic issues.

I would say rather that the CPC manages to hang on to public opinion because
they are quite stable and the economy does well enough under their leadership.
But all the stuff that they do to control the minds of the public (censorship,
wumao's, controlling the bloggers) is pretty much a failure, they hang on
despite this.

