Chinese stocks became third only among the countries with the largest equity market in the world. Japan overtakes the country's No. 2 ranking.
Chinese shares were worth $6.09 trillion at the close on Thursday. Japan ended with a stock market worth $6.16 trillion. The United States remains at no. 1 spot with a stock market worth more than $31 trillion.
China's stock market surpassed Japan's in late 2014. At the time, Chinese shares rose to an all-time high of more than $10 trillion in June 2015.
Market analysts think Chinese equities and the yuan have been taking a beating this year amid the ongoing U.S.-China trade tensions. For one, the CSI 300 index of major stocks listed on the Shanghai and Shenzhen exchanges dived by more than 17 percent year to date according to the Financial Times. On the other hand, Tokyo's Topix index has only slipped at 4 percent in 2018. The yen has been up to nearly 1 percent.
Banny Lam, head of research at CEB International Investment Corporation in Hong Kong, believed China might have lost its ranking to Japan due to impacts of the U.S.-China trade war. On Aug 2, President Donald Trump has, again, asked U.S. Trade Representative Robert Lighthizer to consider raising another round of tariffs on $200 billions of Chinese goods from 10 percent to 25 percent.
"The Japan equity gauge is relatively more stable around the current level but China's market cap has slumped from its peak this year," Lam said, as quoted by Bloomberg.
Linus Yip, the strategist with First Shanghai Securities Ltd, thinks that the Chinese market will continue to hover at low levels for the next months but will recover in no time.
"There's still a chance that China's stock market will recover with total capitalization ascending to the world's No. 2 place again," the strategist said.
Meanwhile, China and Japan seemed unfretted with their placements in the stock market. As reports come out about Japan overturning its no. 2 positions, the two countries welcomed discussions on upholding their harmonious ties.
Chinese State Councilor and Foreign Minister Wang Yi and Japanese Foreign Minister Taro Kono marked the 40th anniversary of the signing of the China-Japan Treaty of Peace and Friendship at the sidelines of the ASEAN foreign ministers' meeting in Singapore.
Minister Wang was optimistic that Japan would work with China to ensure that the Sino-Japanese relations will continue to flourish beyond the improved bilateral ties. The country embraces the opportunity to work with Japan in deepening cooperation in the technology sector, and the third-party market.
Minister Kono also acknowledged the favorable Japan-China relations at present. He said his country also welcomes cooperation with China on different industry sectors.
