It is a bitter pill to swallow for China’s small investors. Crowded around small screens in a branch of the Bank of China in Beijing, dozens follow the flickering numbers as they change every few seconds.
“I have been playing the stock market for 10 years now,” one investor tells us, “I made a lot in the last two years, but right now it is going down.” Shanghai’s benchmark Composite Index has lost 70% of its value so far this year, and is still falling.
But many here do not believe the government’s explanation that this crisis is American in origin. They say Beijing is not doing enough to limit the fallout from the States.
“There is so much corruption” one woman says, “for example, the government and officials are the only people able to buy non-transferable shares, which have guaranteed returns. We will not stand-by and let them continue to do this.”
There are more than 100 million small investors in China, and many have invested large amounts in the stock market. In a country where the social security system is barely out of its nappies, shares seemed to be the solution to all their problems. A giant game of roulette, which the house is now winning.
“I have been playing the markets for about a year now”, a young man tells us, “I haven’t made any money yet, but I have to stay optimistic. Everybody is losing money now, and there is nothing you can do about it.”
A point reiterated by Zhao Xijun, Deputy Director of the School of Finance at Renmin University in Beijing. “The only thing we can do is educate our investors and try to stabilize the financial market. To minimize the impact on the domestic financial market, we need to make investors understand that it is mainly domestic factors affecting the stock market despite the financial crisis in the US.”
In a recent survey of 765,000 internet users, 92.5% said they had lost money on the stock market since 2007 (long before the current crisis) with 60% losing more than half of their initial investment. And you don’t have to look far to see the fallout.
Every day there is another story in the Chinese press about somebody losing everything on the stock market. Elderly investors seeing savings they spent their life collecting, disappearing in the blink of an eye; and businessmen having to close down their firms because of ill-thought speculation on the markets.
Since hitting a peak on October the 16th last year, the Shanghai Composite Index has dropped below 2,000 points, and stocks are continuing to fall…
Coming hot on the heels of the two golden years of 2006 and 2007, when the market shot up 130% and 100% respectively, the drop is particularly hard. The miracle then becoming a mirage, as China’s small investors are left wondering if they will ever recover their money.