China Beats Japan to Become World's Second-Largest Stock Market

China has taken over Japan to become the world's second largest stock market(Reuters)

China has taken over Japan to become home to the world's second-largest stock market for the first time in three years.

The capitalisation of the Chinese stock market increased by 33% in 2014 reaching $4.48tn (£2.86tn, €3.6tn) thanks to the merger of the Shanghai and Hong Kong stock exchanges – giving investors access to mainland shares – while the Japanese market declined 3.2% to $4.46 trillion in 2013.

China was briefly the second-biggest market behind the US in March 2011 after an earthquake in Japan created a sharp fall in stock market indices.

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On 21 November China reduced its key interest rate for the first time in two years and more steps are likely to be taken to support its economy, which slowed to a five-year low in the third quarter this year.

The yen has seen a 10% decline in 10 months as Prime Minister Shinzo Abe's tight monetary policy proved to be ineffective.

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