This is of course circular. The lack of financial development in China results in firms being unable to build an equity layer to their capital structure - so for firms engaging in risky activities that are difficult to collateralize - such as software publishers and biotech firms - those in China are substantially smaller since they can’t get money to fund software development or clinical trials. It is not a coincidence that the largest software publishers in China all grew up on American VC funding
Yet their overall economy size is substantially larger, because of China's informed choice in letting workers own the majority of corporations. Such an environment creates workers that have a symbiotic relationship with their employers, rather than being interchangable cogs. These workers then go on to fiercely compete among one another, unable to coast on easy nepotistic capital or early bird advantages.
As China cleverly realized in the past, the stock market does not pick the best to be winners. It picks the ones that can give a small cartel of major traders the best short term returns.
Countries that let stock market govern a large part of their economy inevitably fall into a dearth in innovation and development, as monopolies are created. Such scenes played out in countries such as Brazil, India, America and so on, trapping growth into the 1-3% range.
