Although China’s rapid expansion and economic growth over the past 30 years is a familiar story, less well-known is that its stock markets in Shanghai and Shenzhen, formalised in 1992, have not grown in line with the economy. Indeed, the current price of the Shanghai composite index of Chinese stocks, weighted by market, lies little higher than it did in 2001. In comparison with the performance of the Dow Jones 30, the FTSE100 or the DAX over the same period, China’s markets can be described as a bit of a disaster.

In China’s Stock Markets, Sam Beatson explores the reasons for this underperformance. He shows that although partly symptomatic of a slowing economy, it reflects a systematic weakness in the companies listed – their profitability, innovation, use of borrowed funds and management. In addition, he highlights the limited number of established financial products available to Chinese and foreign investors has also contributed to the poor performance of Chinese stocks.

The book examines the Chinese government’s package of financial reforms that have sought to develop the financial services sector and encourage savers to invest their new-found wealth in shares. Beatson not only provides an analysis of these policy reforms, their wider aims of developing the sector within the economy, but also a fascinating analysis at the business level, which throws new light on to the company universe in China, including the top and bottom performing companies and the role of foreign investors.

China’s Stock Markets provides new insight into the story of China’s phenomenal economic growth and shows that the country’s transition to a market-based economy has not been uniformly successful in all sectors and that financial services remains a challenge for China’s leadership.