China will overtake the U.K. and Japan to become the second-largest global equity market after the U.S. by 2030, a report by investment bank Credit Suisse says.
Capitalization levels in China are set to jump over the next 17 years to $54 trillion - the equivalent of a 19 percent share of global capital markets. China is currently the fourth largest global equity market.
"The forecast is based on the assumption that China's capital account liberalizes over the next 17 years, giving foreign investors access to the A-share market," said Credit Suisse.
The bank also found that emerging nations are set to more than double their share of global capital markets by 2030, catching up with developed peers.
"The 20 emerging nations currently only represent less than half of their fair share of the global capital market universe - accounting for only 22 percent of global equity market capitalization, and a 14 percent of the global corporate and sovereign bond markets," said the analysts.
However, by 2030, emerging markets' share will increase to 39 percent, and to 36 percent and 27 percent respectively for corporate bonds and sovereign bonds, the bank said.
This surge in capital will be driven by an influx in emerging market equity and corporate bond supply, coupled with demand driven by growth in domestic mutual, pension and insurance funds and helped by the relatively high savings ratio prevalent among emerging economies, Credit Suisse said.
Emerging market equities and corporate bonds will see the fastest 17-year nominal U.S. dollar compound annual growth followed by emerging market sovereign bonds at 8 percent, doubling the pace of their developed peers.