At the epicenter of China’s economic metamorphosis stands the manufacturing sector, which has risen to prominence in the nation’s financial outlook.
The Shenzhen Stock Exchange is showcasing the sector’s remarkable influence, with manufacturing companies holding a substantial share of the overall market capitalization.
In this line, data acquired by Finbold indicates that as of Q2 2023, the manufacturing sector accounted for a staggering 70.36% of all Shenzhen Stock Exchange market capitalization, reaching ¥23.86 trillion yuan ($3.34 trillion). The information technology sector comes in second with nine times less the market capitalization at ¥2.64 trillion, followed by finance at ¥1.63 trillion. Utilities rank fourth at ¥751.68 billion, while wholesale & retail close the top five categories at ¥697.41 billion.
Other top sectors on the exchange include transportation (¥569.76 billion), real estate (¥568.77 billion), agriculture (¥544.35 billion), research and development (¥445.69 billion), and business support (¥380.03 billion).
Elsewhere, the annual trading value at the Shenzhen Stock Exchange in China has seen a steady rise in recent years, highlighted by a remarkable growth of 336% from ¥44.47 trillion in 2014 to ¥194.04 trillion in 2022. The trading value for 2022 represents a minor drop from the figure recorded in 2021, which was ¥195.38 trillion. In 2020, the trading value stood at ¥162.22 trillion.
Drivers of Shenzhen Stock Exchange manufacturing dominance
The research report also highlighted some of the driving factors likely influencing the Shenzhen Stock Exchange’s dominance by the manufacturing sector. According to the research report:
“The exchange’s focus on small and medium-sized enterprises (SMEs), many of which are in the manufacturing industry, further contributes to their prominence on the stock exchange. Notably, the Shenzhen Stock Exchange facilitates China’s multi-tiered capital market system with three boards: the Main Board, the SME Board, and the ChiNext Market. The SME Board caters to stable and profitable companies, many of which are in the manufacturing sector. Consequently, it serves as a barometer for China’s manufacturing industry.”
However, the sector’s prevailing position on the exchange has not been without its challenges. In particular, it faces increased global competition, growing environmental apprehensions, and the looming effects of economic cycles.