Tags: China, currency, stock market

China Currency & The Global Stock Market

September 1st, 2020

China Currency & The Global Stock Market

While talking about the global stock market, we can't ignore the role of China, the world’s second-largest economy. China has substantial effects on the stock markets worldwide. Join us to see the evolution of China's currency.

 

Numerous areas in China’s stock market continue to grow in global influence. China's economic rise is an example from which many countries can learn, research and yield practices to grow.

 

You can also build your wealth by investing in the stock market with the help of Boracchia Wiviott Wealth Partners Forex Currency ETF Portfolio and Global Developed, Global Emerging, and China Portfolio

 

China is among the world’s fastest-growing economies, with annual gross domestic product (GDP) growth averaging 9.5% through 2018. A pace described by the World Bank as “the fastest sustained expansion by a major economy in history.”

 

Before understanding why China impacts the global stock markets, let us uncover China’s currency over the years, and it's fluxes. Which will help us to track the progress of China's economy and then its effects on global markets worldwide. Let's begin!

 

History Of Currency In China

 

The Renminbi (RMB), also called Chinese Yuan (¥) has been the official currency of China for over 50 years. Renminbi means "the people's currency". Today it has an exchange rate of 6.9 RMB to $1 U.S dollar. Let's dive into years back to outline the progress of the Chinese currency.

 

Coins As Currency In Ancient China

Coins were used as the primary form of currency back in ancient China. The same design of coinage lasted 2,000 years in China. The quality and value of coinage reflected the fortunes of the ruling dynasty. These coins can be made of iron, silver, copper, gold with distinct weight, shapes, and marks.

 

china-currency-global-stock-market

Ancient China used coins as the primary form of currency. 

 

Shell Money. 

Back in the Shang dynasty, cowrie shells were used as currency in China due to their attractive appearance, beautiful texture, color and the feature of easy to carry and count. The unit of shell money is ‘peng’ ( which means friend).

 

These shells probably came from the Indian Ocean or the South China sea. By the end of the Shang dynasty, the amount of cowrie shell money was under tight control as they did not occur in China and were rare. Due to this, other forms of shell money such as bone, stone, pottery, copper etc. were used.

 

Copper Cash. The Qin Shi Huang Dynasty introduced copper cash and got rid of all types of currency the Chinese were using when they introduced copper cash. The copper coins were distinguished by the letters inscribed on the coins.

 

The coins were round-shaped with a square hole in the centre. The main reason behind this was the ancient belief that the earth is square, and heaven is round.

 

Leather Currency. The Chinese made leather money from white deerskin. They used to chop deerskin into 1 Square-foot piece and dyed the edges with bright colors.

 

Paper Currency. In the 9th century, the Chinese became the first to introduce paper money. Jiao Zi was the first known paper currency it was printed with men, trees, ciphers, houses etc.

History Of Stock Market In China And Its Effects On Global Markets

 

1990s

china-currency-global-stock-market 

 

During the 1990s, China witnessed an upward trend of local stock indexes, grabbing the attention of financial experts throughout the world.

 

China’s economy has experienced tremendous development since the inception of two exchanges in December 1990: Shanghai Stock Exchange and Shenzhen Stock Exchange.

 

The establishment of these stock markets was a substantial milepost on the road of economic system reform in China. The number of listed companies reached 1,160 from only 10 companies and gained a total market capitalization of 525.6 billion USD. At that time, more than 65 million investment accounts were recorded.

 

On May 1996, Dow Jones and company introduced its China index series consisting of four indexes. The Dow Jones Shanghai and Shenzhen Indexes covered about 80% of the market capitalization of the Shanghai and Shenzhen Stock exchanges.

 

For six years, China's stock market delivered impressive returns and outpaced many of the world’s best-known indexes.

 

1994 and 1995 were the worst years. The index dropped more than 50% even while the economy experienced explosive GDP advancement.

 

Then in 1996 due to a 125% surge, the index broke through both 100 and 150 points barrier and then gradually passed the 200 point mark in mid-1997.

 

At that time, China became the fastest growing economy of the world after which it became a major commercial partner of the United States and also the third-largest US export market. In 2000 the index remained close to 250 points.

 

Then in July 2001 Chinese indexes had a reverse gear and indexes got back to around 100-150 points due to sharp slowdown in the information technology sector.

 

After 2001, the IMF expected that China’s economy would grow 6.8% in 2002. And the Chinese economy continued to power ahead. China's gross domestic product (GDP) expanded by an average annual rate of 10.7 percent during the 2003-2011 period.

 

2010s

The proportion of China's GDP in the world economy rose from 4.4 percent in 2002 to about 10 percent in 2011. At this time the experts from the whole world kept a sharp eye on China’s constantly growing economy.

 

The rate slowed down to 7.8% in 2012 due to the sluggish recovery in the US market, which depressed external demand for China. In 2013 the economy increased by 7.7% and 7.4% in 2014.

 

In 2015 the economy grew by 6.9% only after which the government introduced several plans to modernise and upgrade China's manufacturing due to which China became an export giant and influenced world markets.

 

Ignoring the sluggish growth of the world economy, China became the highest growing economy in 2016, with a 6.8% increase rate.

Fight of Titans 

china-currency-global-stock-market

 

In 2017, the Trump Administration launched a Section 301 investigation of China’s innovation and intellectual property policies deemed harmful to U.S. economic interests.

 

It subsequently raised tariffs by 25% on $250 billion worth of imports from China, while China increased tariffs (ranging from 5% to 25%) on $110 billion worth of imports from the United States. Such measures decreased bilateral trade in 2019.

 

In conclusion, this conflict between the two countries is having a negative influence on world markets.

 

China has faced new challenges in 2020, the rest of the world as all the economies and global stock markets have fallen in most sectors due to the Coronavirus outbreak.

 

China’s growing global economic influence and policies have taken the world by storm. They are living proof that economies can be built from scratch and if history tells us anything, the countries will adapt to the new way of life and end up stronger.

 

You can also build your wealth by investing in the stock market with the help of Boracchia Wiviott Wealth Partners Forex Currency ETF Portfolio and Global Developed, Global Emerging, and China Portfolio

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Lea Wiviott Boracchia, Co-Founder, FinancialPlans.Info and InvestingProfits.Pro, both apart of the renowned Boracchia Wiviott Wealth Partners

We are a registered investment advisory focused on accessible wealth planning for everyone. Our mission is to help women, men and people of all ages, races, locations, and anyone plan and secure their most successful future. We were originally established in 2005 by way of 3 firms before my husband Marc and I registered our independent advisory in California.

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