Yes, nowhere is immune to the ongoing financial disaster we're seeing down in the state, not even my own shares of mutual fund. :)
Financial chaos bites the dragon
GEOFFREY YORK
From Friday's Globe and Mail
October 10, 2008 at 1:35 AM EDT
BEIJING — For more than a decade, Yang Zhong has profited from the capitalist system. The 39-year-old Beijing businessman earns a comfortable income by buying and selling stocks on Chinese stock markets, the ultimate expression of confidence in global finance.
But his latest investment – about $160,000 that he sunk into Chinese stocks this spring – is looking increasingly disastrous. He estimates that he has lost almost 70 per cent of his money as China's markets have plummeted.
“Look at one of the stocks that I bought, Chongqing Brewery,” he said yesterday, pointing gloomily to the giant electronic screen at a trading hall. “I bought it at 35.9 yuan and now it's at 8.21 yuan. My money has disappeared.”
His losses are now so severe that they have spilled over into his other investments. He was planning to buy a new apartment, but he cancelled the purchase.
A Chinese man walks past a billboard promoting a new property development under construction in Shanghai on Oct. 9, 2008.
“I'm worried that the declines will continue,” he said. “The global financial crisis will affect the lives of the Chinese people sooner or later. In my opinion, the Chinese stock market won't improve for the next three years at least.”
The glum mood is spreading across China's financial community as the global market meltdown continues. A slowdown in its exports, a slump in its construction industry and a collapse in its stock markets have dented China's self-confidence at a crucial time when it was expected to be an engine of world growth.
A year ago, the Beijing trading hall of China Galaxy Securities Co. was a crowded and noisy place, bustling with the excited activity of new investors and traders. Dozens of people stood in queues every day to open their first trading accounts.
Yesterday it was a much more subdued and morose scene. The queues had disappeared. Investors sat quietly in chairs, talking in low voices or watching in silence as their stocks lost value.
Many of China's small-time investors are “recession virgins,” as some analysts call them. They've only seen the boom years. They've never experienced an era when the world is slipping toward a recession, with banks collapsing and markets tumbling. While most Chinese remain confident that their economy will survive, their nerves are rattled.
Qi Fan, a 72-year-old pensioner, says he invested 100,000 yuan (almost $17,000) in the Chinese stock market from his pension income and his savings. Now he has less than a third of his money. The main Shanghai market index has lost two-thirds of its value in the past year, and it plunged a further 9.5 per cent this week after a brief recovery last month.
“Most of us investors are upset and feeling depressed,” Mr. Qi said yesterday. “I have no confidence that the Chinese markets can recover in such a terrible international situation. The U.S. economy is in serious trouble now, and I think an international depression is inevitable.”
He fears that the damage will go far beyond the stock market. “I think China's economy will definitely be affected by the global problems. A sharp drop in exports to the U.S. will affect a lot of exporting companies, and unemployment will follow. What can I do now? I feel helpless.”
Another investor, a 35-year-old man who gave his surname as Wang, said he managed to get out of the stock market near its peak. But he predicted years of stagnation in Chinese markets. He calls it a “war of resistance” against the crisis – borrowing a term from China's war against Japanese invaders in the 1930s and 1940s.
This siege mentality, in turn, could dampen China's economic growth. “In a climate like this, people will tend to postpone their spending,” said Michael Pettis, a finance professor at Beijing University. “The people I know are very worried, very aware of it and nervous about it.”
Many Chinese commentators are eager to blame the United States as the villain of the current crisis. State newspapers, attacking the “greed” of Wall Street bankers, have accused Washington of a lax monetary policy. Some Chinese media have proclaimed the end of U.S. global dominance.
Most analysts expect China's economy to keep growing at a substantial pace for the foreseeable future, but that growth could slow to 7 or 8 per cent next year, down from the current 10 per cent, as China suffers a slowdown of export growth and a sharp decline of 15 to 20 per cent in property prices.
“The blood of the global economy has begun to freeze right from its heart – the United States,” said Ha Jiming, chief economist at China International Capital Corp., in a research note yesterday. He predicted a deceleration of China's economic growth for at least the next three years.
With a report from Yu Mei in Beijing.
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