Over the last few weeks in China, the stock market has been almost the only thing on the lips of citizens—from the extraordinary hike in prices beginning in August 2014, to the precipitous crash beginning mid-June that wiped out nearly $3 trillion in market value, it seems everyone has a pet theory.
First, Chinese want to know why the market rocketed up in the way it did in the first place. In this, the Chinese Communist Party gets the blame.
“Emperor Xi [Jinping, the head of the Chinese Communist Party] called for it to go up 10,000 points, his loyal official Li [Keqiang, premier] forced the policy… and the media agitated the entire nation to get into stocks, trying to link the stock market victories to the achievements of the government,” wrote the Internet user Iamoverseachinese.
It was indeed an official policy of the Party to boost the stock market and bring a sense of confidence to the public, given China’s overall lagging economy. Editorials in People’s Daily, the mouthpiece of the Central Committee, extolled the benefits of investing in stocks, and hailed a bull market that would last decades.
That lasted until about June 12, when the Shanghai Composite Index hit its peak, and then embarked on an uncontrollable plummet.
Many Chinese were delighted with the rally, with many of them taking out loans to finance stock purchases, borrowing money from friends, family, and brokerages. But most who bought stocks after April are most likely now in the red—and in particular, those that bought at the rally’s peak.
After the crash, the market was compared to something more closely resembling a casino.
“The government runs the casino and incites the people to gamble. Now investors are leaving after they’ve lost everything. The casino is anxious. ‘Quick, give them bonus points so the gamblers will continue to play!'” wrote vaio2014. “That’s the government’s policy to save the stock market.”
Many of the comments were made in response to news articles about the recent stock turmoil, or on electronic bulletin boards. These bulletin boards, called BBSs, lost their popularity with Internet users in the West some years ago, but are still one of the most popular types of Internet forum in China. Despite the restrictions on expression in China, perusing these boards allows insight into the thinking of the public on the affairs of the nation.
Cynicism could be said to be the overriding sentiment: the elite and those with connections profited from the rally and escaped before the crash; the market was used to extract money from retail investors; politics lurks behind everything.
The user vaio2014 sought to lay out the way the elite benefit from the market. “If you are a major stockholder and you want cash, there are two ways. One is to sell 20 percent daily or sell it in several weeks. The individual investors will take over and therefore the impact to the stock market is not much. The other is sell them all at once to crash the market. You might work with several other major stockholders if your individual impact is not great enough,” he wrote.
“Of course, you’ll sell them all. The crashed market will allow you to buy more when the stock is low. Those who engage in the stock market would always do it this way. This is exactly what happened in China last month.”
He concluded: “Who has the ability to sell them all to crash the market? The answer is the government, the state-owned enterprises controlled by the government or the funds controlled by the Communist Party and the elite families. Insider trading and stock manipulation are felonies in Western countries. While in China it’s just a piece of cake. The regime and the Communist Party are the criminal gangsters.”
Still other commentators thought it important to warn individual investors away from the illusion of getting rich quick through the market. “Those who entered the market last year are the real stock investors, and all of them profited,” wrote the user hachimada. “Those who entered the market this April and May are the gamblers, jealous of people who made money but lack the basic knowledge of stocks. Losing money is a lesson they paid for. Next time they’ll be smarter about it.”