Two Years In, How Does the STAR Market Measure Up?

Trustee Chair in Chinese Business and Economics  >  Trustee China Hand

By The Trustee Chair Team

It’s been over two years since the launching of China's version of NASDAQ, the Shanghai Stock Exchange’s Science and Technology Innovation Board, known as the STAR market. In 2019, the Trustee Chair team analyzed the STAR market’s initial 25 listed companies. Since then, it has grown substantially, with now more than 350 listed companies. The Trustee Chair team analyzed the new data to evaluate the STAR market’s performance two years later. Here are five key takeaways. 

1. The STAR market is still relatively small.

Although the STAR market has grown significantly over the past two years – from $113 billion to $976 billion in market cap – it is still puny compared to the Shanghai and Shenzhen exchanges, China’s corporate bond market, and credit generated through its banking system (see Figure 1). Nevertheless, the STAR market is a way for Beijing to signal its support for specific high-tech industries and a place for companies to raise a portion of their funds.

Figure 1: Total Market Cap ($ Trillions)  

2. The STAR market primarily represents private Chinese companies.

Private enterprises account for 80.1% of companies listed on the STAR market and 63.7% of the total STAR market cap (see Figures 2 and 3). By comparison, the percentages of private firms listed on the Shenzhen and Shanghai stock exchanges are somewhat lower, 67% and 53%, respectively. Thus, the STAR market features more private companies than China’s leading stock exchanges. This is most likely because its registration-based IPO system allows more technology-driven innovation companies with lower profit margins to go public.

Figure 2: STAR Market Companies by Ownership  

Figure 3: Market Cap by Company Ownership ($ Billions)                                               

3. The STAR market has outperformed other markets in China.

The overall performance of the Shanghai and Shenzhen exchanges has been essentially flat for the last decade. By contrast, the average share price of companies listed on the STAR market grew 14.4% over the 12 months ending on November 30, 2021 (see Figure 4). Private companies’ share prices performed even better, increasing by 15.7%. When analyzed by sector, “Energy Conservation and NEV” companies did exceptionally well, as their share prices increased by 72.9%.

Figure 4: Stock Performance by Company Ownership (%)

4. STAR-market companies closely align with China’s top industrial policy priorities.

82% of the STAR-listed companies, 297 firms, are operating in industries targeted by the Made in China 2025 (MIC2025) initiative (see Figure 5). These companies add up to 88% of the STAR market’s total market cap.

As Figure 6 shows, most of these companies work in the field of advanced IT equipment (such as computer applications and semiconductors), bio-medical devices, and electric/power equipment (such as solar and wind power equipment). This shows that the STAR market supports Beijing’s goal of directing financing to companies in “high-tech and strategic emerging sectors.”

Figure 5: STAR Market Companies Operating in MIC2025 Key Industries

Figure 6: Sectors Represented on the STAR Market

5. Most STAR-listed companies are not officially treated as a threat to US national security.

The majority of STAR-listed companies operate in MIC2025-related industries. However, although this may be a conscious choice of some policymakers, it also is a natural result of the fact that the STAR market exists to support S&T innovation. This is nothing new: 23 of the initial 25 companies listed on the STAR market were in sectors listed in MIC2025.

That said, only 6 of the 362 STAR-listed companies have been placed on one of the various US entity and sanction lists. This suggests that at present the large majority of STAR-listed companies are not viewed as threats to US national security.

Related Trustee Chair Activity

Blog Post: Scott Kennedy, “Congress on China: Then and Now,” CSIS, June 22, 2021.

Report: Scott Kennedy and Yilin Wang, “Cheap Talk: China’s Central Bank Still Struggles to Speak to Markets,” CSIS, February 8, 2021.

Blog Post: Kevin Acker and Mingda Qiu, “STAR Performers: High-Tech, Coastal, um, State-Owned and Military-Focused?” CSIS, August 12, 2019.