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.
China's rise to second place in the global equity markets will be boosted by a surge in its proportion of emerging nation capital markets deal value (including initial and secondary public offerings).
It already represents a hefty proportion with a 40 percent share (equivalent to $639 billion) since 2000, but this figure is expected to rise to 60 percent ($3.6 trillion) in the next 17 years - a 5.5 fold nominal increase.
China's corporate bond market is also set to explode. The world's number two economy currently represents 37 percent of the entire corporate bond market in terms of deal value, and will represent a 53 percent share by 2030.
Other countries set to climb the capital markets ladder include Saudi Arabia, which will rise to sixth position from 10th, Indonesia, to seventh from 12th and Turkey rising to 10th from 17th by 2030.
Meanwhile, the U.S. will remain the largest equity market worldwide with a projected $98 trillion capitalization and a 35 percent weighting of the overall global market in 2030.