By Ding Qi (Chinadaily.com.cn)
Updated: 2007-08-07 16:53

With prices of stocks leaping in recent weeks, the market value of the mainland's stocks has approached the nation's GDP, but the market can contribute more to China's economic development, the China Business News reported on Tuesday.

According to data released by the exchanges, the combined market value of shares listed in the bourses of Shanghai and Shenzhen reached 20.68 trillion yuan (US$2.74 trillion) on Wednesday, accounting for 98.07 percent of China's GDP of last year.

The booming market also delivered the first stock priced over 200 yuan yesterday. Shares of the China State Shipbuilding Co Ltd, a major ship maker of the country, soared to 200.50 yuan during Monday's trading, and became the most expensive stock ever in the mainland's market.

"Those upbeat figures suggest that domestic capital markets will continue growing along with the nation's economy. Meanwhile, the bullish market has attracted more investors with the prospect of huge fortunes." said Qian Xiangjing, an analyst from the CITIC-Kington Securities.

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However, Yang Hongjie, a researcher with the Haitong Securities pointed out problems with the figure.

"The increasing securitization ratio (ratio between a nation's securities market value and GDP) of China is close to those of Britain and the United States, but our securities market is far behind their development standards."

According to Yang, the huge market value is partly driven by the bulging stock prices resulting from excess liquidity. In addition, since a large portion of the stocks remained untradable at present, the circulation value of China's stock market only accounts for 33.99 percent of the total value. Therefore, the Chinese stock market does not serve as a good weatherglass for the current Chinese economy.

However, along with the completion of the split-share reform, the return of red-chip companies and more IPOs, there will be more high-grade stocks to be circulated in the market, which will forge a closer link between the capital market and the economy, the report predicted.