Shanghai Stock Exchange
State-directed greenhouse: CSRC controls which companies list, when, and for whom. STAR Market channels RMB 1.1T to AI/semiconductors/biotech. Foreign investment capped at 30% with daily quotas—airlocks, not barriers.
The Shanghai Stock Exchange is a greenhouse—a controlled environment where the state determines which companies grow. CSRC decides who lists, when they list, and increasingly, who can sell. The March 2024 '315 New Policy' and April 2024 'National Nine Articles' made this explicit: tighter admission controls, stricter delisting, greater accountability for controlling shareholders. Review timelines stretched from the official 20 days to 6+ months. This isn't dysfunction—it's design. China channels capital to national priorities through state-directed listing policy. The STAR Market, launched in 2019 as China's NASDAQ equivalent, exemplifies this: 589 companies raising RMB 1.1 trillion, investing RMB 168 billion in R&D (triple their net profits), employing 240,000 researchers. The state picks the sectors (AI, semiconductors, biotech), loosens restrictions there, and restricts IPOs elsewhere. Foreign investors can access A-shares through Stock Connect and QFII programs, but aggregate holdings are capped at 30% per company (10% per investor). Daily quotas limit northbound purchases to RMB 52 billion. These aren't bugs—they're airlocks preventing uncontrolled capital flows from disrupting the controlled environment. Shanghai raised RMB 163.7 billion in IPOs in 2025, up 23% from 2024. But the story isn't volume—it's direction. This is industrial policy disguised as securities regulation.
STAR Market companies invested RMB 168.1 billion in R&D in 2024—more than triple their combined net profits. This isn't sustainable business practice; it's state-subsidized technology catch-up disguised as public market investing.
Key Facts
Power Dynamics
Operates mainland China's primary A-share equity market, STAR Market (tech board), bond market; supervised by CSRC
Listing approval is industrial policy: CSRC decides which sectors get capital access, throttles IPOs when markets weaken, directs national champion companies to list domestically
- CSRC (controls all listing approvals, can suspend at will)
- State Council (sets strategic direction via 'National Nine Articles')
- Major state shareholders (SOEs dominate large-cap listings)
- Foreign ownership caps (30% aggregate limit)
- CSRC (ultimate regulatory authority, sets listing pace)
- Shenzhen Stock Exchange (sibling exchange, shares policy direction)
- HKEX (Stock Connect counterpart for foreign access)
- State-owned enterprises (largest listed companies)
- PBOC (monetary policy affects market liquidity)
Revenue Structure
Shanghai Stock Exchange Revenue Sources
- Trading fees and stamp duty 50%
- Listing fees 20%
- Market data 15% →
- Other (membership, technology) 15% →
State can throttle IPOs at will; policy shifts create volume swings; foreign access restricted by design
Unlike NYSE/LSE market-driven models, SSE volume depends on state willingness to approve listings and foreign access policy
Decision Dynamics at Shanghai Stock Exchange
STAR Market registration-based IPOs: faster than main board when policy favors the sector
'315 New Policy' 2024 created indefinite delays for companies outside priority sectors
CSRC approval is explicit bottleneck; state uses IPO pace as market stabilization tool
Failure Modes of Shanghai Stock Exchange
- 2015 bubble and crash: 40% decline, trading halted, state intervention required RMB 1.5T+ in support
- 2021-22 tech crackdown: regulatory actions against Ant Group, Didi destroyed hundreds of billions in value
- 2023-24 IPO slowdown: CSRC throttled listings to prop up secondary market
- State direction creates moral hazard: retail investors expect government support
- Capital controls limit foreign participation, reducing liquidity and price discovery
- Industrial policy distorts valuations: favored sectors trade at premiums divorced from fundamentals
Major policy reversal—either over-tightening that freezes capital access or over-loosening that triggers bubble—could destabilize state's dual mandate of market development and stability
Biological Parallel
Shanghai Stock Exchange operates as a greenhouse—a controlled environment where the state determines which organisms (companies) grow. Temperature (monetary policy), light (regulatory approval), and nutrients (capital access) are centrally managed. Foreign species (investors) are admitted through airlocks (Stock Connect, QFII) with quantity limits (30% cap) to prevent disrupting the carefully calibrated internal conditions. This isn't a wild ecosystem like NYSE—it's artificial selection directed toward national goals. STAR Market is the biotech wing where the state cultivates strategic species (AI, semiconductors) regardless of commercial viability.