Show us your money. That is the message China is sending to overseas investors this week as its financial officials pound the pavement to entice funds to its stock markets. Only two years ago they were turning those investors away. But things are different now. When western markets started their great recovery in March 2009, China’s markets were already halfway through their post Lehman-crisis rally. They peaked too soon: since August 2009 the Shanghai Composite has lost 40 per cent. The S&P 500 has gained 45 per cent.

Guo Shuqing, China’s top securities regulator, is trying to make the market more attractive. He has eased restrictions this year to lure more institutional funds and foreign capital. Foreign investors own just 1 per cent of the total free-float market capitalisation in China so there is a lot of room for growth. There is also liquidity: monthly trading values in Shanghai and Shenzhen, combined, might have halved since their peak at the end of 2007, but they are still twice those on the London Stock Exchange. And there is diversity: Shanghai’s 10 biggest companies make up about a third of its main index. In Hong Kong they account for 60 per cent of the Hang Seng and in London almost a half of the FTSE 100.

But the Shanghai market is stuck, for now, with retail investors, who make up three-quarters of daily turnover and whose morale is battered. Corporate earnings have lost momentum and investors have had their appetite tested. In Shanghai alone there were almost 100 initial public offerings over the past five years listing on multiples of up to 60 times earnings. Valuations are now down sharply: the Shanghai index trades at 11 times current earnings. That looks cheap. Fears of insider trading and weak corporate governance, however, could scare off foreign bargain hunters.