Advertisements
//
you're reading...
Automobile Industry, Finance & Economy, Manufacturing & Industry, Trade & Investment

Why China’s stock market is so boring


BYD: the share price of China’s rechargeable vehicle batteries manufacturer at HK$79.05 on 11 Oct 2017 morning

In September 2008, Warren Buffett’s Berkshire Hathaway acquired 10% stake in BYD, a pioneer in electric vehicle technology and production in China, for around US$232 million (around HK$1.8 billion or HK$8 per share). This morning, it is $79, slightly down from the record high of HK$83 a few days ago.

BYD’s share price followed the whole China stock market to ride through various up-and-down cycles, including the Lehman Brothers Subprime Crisis sell-off and the attacks from the so-called China Bears (e.g. Kyle Bass, Jim Chanos) over the past 10 years. Yet, Buffett’s investment never went under the water. With the automobile trend towards switching into electric vehicle consolidating all over the world, except the United States under the Trump administration, BYD provides Buffett a handsome return in less than a decade.

Many economists, financial analysts and hedge fund managers have been pessimistic about China’s economic development for more than 20 years in the sense that either the growth would slow down suddenly or the whole economy would collapse dramatically. One of the reasons for this view is the boring stock market in China which means, except for very few, most enterprises’ stock price elevation did not match with the rapid and steady growth of the whole economy. For example, the Shanghai A Share Index rose merely from 1000 in the 1990s to the present 3400 (a spike to 6000 before subprime crisis). So, the economic growth must be ‘fake’…….

They were wrong because they did not understand the ‘socialist characteristics’ of the Chinese stock market. It is fundamentally different from the Western stock market at least in one particular way, namely, it must follow the CCP’s leadership to serve the nation rather than to feed the big fat cats. Through direct and indirect interventions into the market by adjusting the money supply, company shares supply, provident funds’ portfolio composition, commodity pricings, state-owned enterprises’ policies, regulations monitoring the hedge funds’ trading patterns, commentators’ articles on official presses and etc, Beijing is determined to ensure that the stock market’s main roles are to serve the whole economy as well as the corporations’ healthy fund-raising needs.

The guiding influence from those vanguard economists in the 1980s remains sound and valid. One of them is Professor Wu Jinglian (1930- ). As a leading figure at the Chinese Academy of Social Sciences and State Council Research Centre, he was one of the drafters for economic reform during the Deng era. He helped lay down the blueprint to open the door for capitalism with courage as well as caution. He endorsed the need to welcome both investment and speculation, but also emphasized the need to prevent any market bubble from brewing at its infancy. What is more important is that the stock market is not a place to enrich people drastically, nor a soil for worsening the gap between the rich and the poor. If you want to become super-wealthy, entrepreneurship is the only officially permissible path.

BYD is one of them, and investors like Warren Buffett are welcome. But if you want to make huge speculative profit by short term trading? Sorry, not here in China.

The opinions expressed are those of the author, and not necessarily those of China Daily Mail.

Advertisements

About keith K C Hui

Keith K C Hui is a Chinese University of Hong Kong graduate major in Government and Public Administration and the author of "Helmsman Ruler: China's Pragmatic Version of Plato's Ideal Political Succession System In The Republic" (2013).

Discussion

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Advertisements

Type 407 Training Visas

Get An Australian Diploma

Learn How To Sell Real Estate To Chinese Buyers

Sell Your Real Estate To Chinese Investors

China Daily Mail

China Daily Mail is not affiliated in any way with The China Daily or the government of the People's Republic of China.

Enter your email address to receive an email each time an article is published, or join our RSS feed. 100% FREE.

Want to write for China Daily Mail?

Read "Contributor Guidelines" above to join our team of 68 contributors. Write news or opinion about issues in China, or post photos and video. Promote your own site.

Recent Posts

China Daily Mail Stories Have Been Featured In:

%d bloggers like this: