Where Are the Chinese Stock-Market Riots?

Back in January, in the opening session at Davos, Yu Yongding sounded a warning.

Yu also noted political risks in China: There are 150 million small Chinese stock-market investors who are going to be very angry if and when the Chinese stock-market bubble bursts. "They were hopeful that they could regain their money, and then they lost more," he said.

At that point, the Shanghai Composite had fallen to 4,700 from a peak of more than 6,000 in mid-October. Today, the index fell below 3,000. And yet, there's precious little in the way of political fallout that I can see.

Sure, there's noise. But if any other country's stock-market index lost half its value over the course of eight months, things would be a lot nastier than they are in China right now.

Maybe a nation of gamblers understands intuitively that sometimes you lose. Or maybe it's something to do with the fact that the stock market is still at double its levels of two years ago.

Comments

[xodin00:]

I would have to agree with the last statement, that it is still double what it was 2 years ago. I think people are coming to recognize China as being in the beginning stages of a widespread economic boom that will last for decades. The significance is also increased being that the country boasts over a billion consumers to support this expansion. Investors that follow standard fundamentals, buy on the dips, do the research, etc, should significantly outperform for years to come. The pace of this growth will lead to some chop along the way, but that is to be expected and taken with a longer term horizon.

2008 Jun 11 03:03 PM

[moonbat1775:]

Thank God for the Chinese! The Japanese shamed us into building better cars (too late?). Perhaps the Chinese will shame us into returning to economic freedom.

My advice to the Chinese: Abandon central banking or at least move toward 100% reserve requirements. You will avoid boom bust cycles and have steady economic growth. It worked in the West for 150 years till we got too corrupt for our britches.

2008 Jun 11 04:30 PM

[Archman Inv...:]

Amen poetsam!!!

Lets hope that it is not to late to salvage our broken system.

2008 Jun 11 05:02 PM

[drbowtie:]

maybe there's no panic because China has 100% state run TV - so they can make sure the public doesn't hear too much of what is happening

once this lasts for a while and the public realizes what is happening, there will be chaos

2008 Jun 11 09:04 PM

[Hang:]

drbowtie. Your comment sounds funny.

The state run TV does not prevent Chinese people from knowing what's happening in China and around the world. Believe it or not, Chinese actually know more about the outside world than do most westerners.

2008 Jun 12 12:23 AM

[johnthebear:]

Did you hear that China Oil which had an initial public offering last November and instantly became the largest capitalized company in the world has now lost 70% of it's value?

They are going to sell $8.7 Billion in bonds to increase working capital! They are required to sell gas and oil below cost by the government. This will probably be passed on to consumers, then you might see riots like we are beginning to see here and in England. Truckers in England pay $9/gal for fuel.

The problem is OPEC,

VERY PLAIN, VERY SIMPLE.

THOSE THAT CONTOL THE OIL CONTROLS THE WORLDS ECONOMIC FUTURE,

AND THEY ARE NOW TRYING TO BANKRUPT THE WORLDS LARGE BANKS SO THAT THEY CAN GAIN POLITICAL POWER AND POWER FOR I-SLUM.

EVEN SUPER POWERS LIKE CHINA, INDIA AND BRAZIL CAN BE HURT IN THE COMING "GREATER" DEPRESSION.

2008 Jun 12 08:48 AM

[J.D:]

Perhaps regular people are too worried about the earthquake efforts and children who died as a result of corrupt construction in Sichuan, or generally surging inflation across the country. Small retail investors are not very important players but yes they have lost their shirts because of China's pyramid-scheme stockmarket. They have a right to be unhappy.

2008 Jun 12 09:30 AM

[SivBum:]

Understand that real estate glut from Beijing to Shenjen is more worrisome than the crashed stock market. Big problem for speculators yonder.

2008 Jun 12 10:50 AM

[huangthomas:]

On June 12, the Shanghai Stock Exchange closed at 2,957.53, down 66.71 (-2.21%). With IPO of China Construction pending, the market may become uglier before policy intervention sets in.

2008 Jun 12 11:15 AM

[huangthomas:]

Yes, real estate market will do worse when the bank reserve rate is hiked to 17.5%. Do you need a car? Buy a house, they will give you a car free!

2008 Jun 12 11:19 AM

[adan:]

maybe the people there still trust....

2008 Jun 12 12:43 PM

[John L.:]

I think the people in China are waiting to see what happens to the stock market as they get closer to the Olympics.

It is expected that the stock market will move upward.

Our company has a plant in China and I can tell you that the opposite may happen as the manufacturing plants are finding supplies getting tighter as the Olympics approaches and resources shift toward doing this right.

Once investors find out about the negative impact on production, it could get nasty.

2008 Jun 15 12:02 AM