What is the China CAPE?
The cyclically adjusted price-to-earnings ratio (CAPE, or Shiller PE) is one of the most respected long-term valuation tools in finance, smoothing earnings over a decade to see through the boom-bust of the business cycle. This gauge applies the same cyclical-smoothing spirit to the China market (Shanghai Composite). Here is the honest caveat, stated plainly: a genuine CAPE requires ten years of realised company earnings, and those figures are not freely available at the index level for most markets. So this is a price-based proxy — it takes the inflation-adjusted price of the Shanghai Composite and divides it by its own ten-year real average, then scales the result to the range investors expect from CAPE. It captures the same core idea — is the market expensive relative to its own cyclically-smoothed history — without claiming a precision the free data cannot support. Read it as a directional cyclical-valuation signal for China, best compared against the market's own past and against other regions on the same proxy basis.
Formula & Methodology
Created by Robert Shiller's CAPE methodology (price-based proxy).
Historical Performance & Limitations
This is explicitly a PRICE-based proxy, not a true earnings-based CAPE, because index-level ten-year earnings are not freely available. It captures cyclical valuation direction but should not be read as a precise Shiller PE. Like all CAPE measures it has little short-term timing value.
Status Classification
| Level | Meaning |
|---|---|
| Strong Undervaluation | Market trading significantly below historical average |
| Fair Value | Market aligned with historical valuation metrics |
| Moderate Overvaluation | Market elevated above historical norms |
| Severely Overvalued | Extreme historical deviation; high downside risk |