China, with a rapidly growing economy, not just nominally, but also relative to the other large world economies, for decades, yet it still shows very anemic overall stock market performance. Normally you would expect that growing productivity and a rapidly growing GDP would produce better overall stock market results. Seems odd to me. Can anyone explain it?


Here's my attempt: markets are forward looking. For many years, China has been growing its GDP at 10% a year and more, so markets correctly anticipated that this would continue for a while and marked up the stocks based on that growth. That growth has been slowing for about 15 years now:

2004: 10%
2005: 11%
2006: 13%
2007: 14%
2008: 10%
2009: 9%
2010: 11%
2011: 10%
2012: 8%
2013: 8%
2014: 7%
2015: 7%
2016: 7%
2017: 7%
2018: 7%
2019: 6%
2020: 2% (COVID)
2021: 8% (catch up)
2022: 3%
2023: 5%
2024: 5% (estimated)
2025: 4% (projected)

As the rates of growth have fallen, Chinese stocks have tread water, because their price reflected the anticipated future growth. Although growth has been and remains healthy, higher rates of growth were already priced in. European stocks have had poor returns because growth has been and remains poor. North American stocks are up sharply because of hopes that growth will accelerate, so the growth better show up, or they too will stagnate or fall.

Regards, DTB