They call China’s stock market a “casino,” yet they are rushing in. They are betting money that the government really does want to finally crawl out of the hole it has dug. They are speculating, looking for short-term gains, with a great degree of uneasiness.
Wang was one of 10 Chinese investors I interviewed last week, some by video and others by email and text message exchanges. All of them are professionals or business owners. They have money to invest but are not super rich. Because the stock market was heavily controlled, most of China’s most competitive companies were largely unable or unwilling to be listed in their home country. There was little correlation between the market’s performance and China’s economy. The SSE composite index of companies that trade in Shanghai peaked in 2007, far before China’s economic expansion reached its pinnacle.
He said he knew the recent rally might be a “trap,” but he felt he had no choice. “This way, I can find a spot closer to the exit, so when it’s time to escape, I can run out faster than others,” Wang said. They reasoned that they might lose money either in the stock market or by doing nothing if inflation eroded the value of their savings. But what if they get lucky?
He thinks the rally will be short-lived. “The financial markets cannot fix the fundamental and long-term issues China faces,” Xie said, referring to how China has made it increasingly difficult for its citizens to seek wealth and speak freely. He said younger people who are throwing themselves into investing should be more skeptical.