Chapter 18 China's stock market chaos

China's stock market has a lot of surprises. It's like going on a roller coaster. It's not too much to say that it's crazy.What is the cause of this irrational madness?How can the future of the stock market be improved? ◎Reporter: It has been a long time since the reform and opening up. Why is the Chinese stock market still so irrational? Chen Zhiwu: We lack truly profound lessons.To cultivate a mature market is to allow investors to share the dividends of the market, and at the same time accept the lessons of the market and act according to the laws of the market. responsible investor.With "social stability" as the first principle of everything, too much doting on listed companies, securities companies, and speculators will only separate the stock market from listed companies, making stocks a world and stock issuing companies a world. In another world, the two worlds have nothing to do with each other, and the stock market is completely like a casino.

◎Reporter: I have a little disagreement.In fact, the Chinese stock market also has lessons. Some stockholders have been made to cry in the past few years.But ironically, the experience they sum up is often lamenting that "China is still a policy market."This kind of lesson seems to make ordinary people more irrational, give up independent judgment even more, and believe that they should follow the government, the big banker. Chen Zhiwu: Yes, what I'm talking about is the lack of lessons from the market.For example, some listed companies in the mainland stock market have been losing money year after year. According to the company law, they should have been delisted long ago, so they created ST shares. ST has been around for a long time, and another SST is created. Isn't this an international joke?

This culture of shyness is the most terrifying thing for the stock market.Some of our officials are very proud of using some policy means, such as publishing an editorial in the People's Daily every now and then, playing with the stock index in the palm of their hands, and taking pride in their ability to control. This is only harmful but not beneficial. There is no way to take investment decisions too seriously. ◎Reporter: Another phenomenon in this round of stock market wave is that even though Buffett has become a household name in China, some fund managers I know have begun to bother to inquire about inside information. No one dares to claim that he relies on public information like Buffett If you come to do research, you will be regarded as a fool. In the West, it is regarded as "insider trading" of street rats, but it is not painful or itchy to crack down on it in China.

Chen Zhiwu: This is the evil result of the irrational "policy market".A large number of stock speculators rely on insider information to make a fortune, and this kind of government management has a huge risk of immorality, because most of the insider information comes from government departments. "Policy City" directs everyone's attention to government inside information, rather than tracking the business model and corporate governance of listed companies. ◎Reporter: In the early years, some local governments "packaged and listed" some rubbish state-owned enterprises on the verge of bankruptcy. This is also an insider trading that disrupts market order.

Chen Zhiwu: Of course, this seriously overdraws the government's credit.The core of a stock market's growth is credit. You say that a stock is a piece of paper. If you don't pay attention to credit, how can it be so valuable?Those who have a monopoly on inside information and profit over the general public will never be tolerated.Practitioners in the US securities industry cannot open stock accounts by themselves.People like Greenspan, not only themselves, but also their family members are not allowed to touch stocks. If they are found, they will be imprisoned or punished.I remember that there was a newspaper delivery man in the United States who bought stocks to arbitrage ahead of time because he saw a news in the newspaper in advance. As a result, he was prosecuted for insider trading.This kind of moral requirement does not know how many people in China today can do it.

◎Reporter: I think about this problem of excess liquidity, and I don’t think there is any solution, unless we can guide common people’s speculative funds out of insecurity to start a business, so that everyone has a firm investment belief in the future.Otherwise, any means such as tightening credit to reduce liquidity will have a devastating effect on the economy. Chen Zhiwu: I completely agree with this judgment.Moreover, it is also the most effective way to solve the current bottleneck of economic development by letting ordinary people start businesses.More people starting businesses will inevitably mean more job opportunities and income opportunities.

◎Reporter: But I made some calculations a few days ago. These friends around me have worked hard for several years, and the money they earn is not as good as the profits from stock trading or buying houses to increase their value. I think this social psychology can not be out of balance?What business do you want to create?Why don't you all stop working and just speculate in stocks.The loss of social efficiency will be quite large.I even have a vague worry that if everyone devotes their energy to studying how to distribute wealth instead of creating wealth, another new authoritarian force will be formed.

Chen Zhiwu: This kind of bad possibility certainly exists, and it has already happened in China.But in fact, people can’t blame people for stock trading. Stock speculation is also extremely important to the economy. In a certain sense, it helps the market to share risks and improve stock market liquidity.A stock market boom could have produced many good results.The best result is to encourage everyone to start a business as mentioned earlier. This logic is completely valid.The stock market is booming, we look at it, wow, the company can make so much money by going public, the blood boils immediately, I also come to start a business, everyone starts a business, even if it starts with opening a small shop.Because although stocks can make money, it is only a small amount of money. In the boom of the stock market, the more profitable way is to create a company by yourself and then let the company go public. This is the most profitable, and it is a big money.The pulling effect of the stock market can fully stimulate the entrepreneurial vitality of a country.Many people study the history of the U.S. stock market, but only focus on the stock market itself, ignoring the several big bull markets in U.S. history. In addition to the profits made by investors and speculators, each time it was accompanied by entrepreneurship in the whole society. climax.In this way, social resources are allocated in a more optimized direction, each time promoting a new round of technological innovation.

In contrast, how much entrepreneurship has been encouraged by China's stock market boom?In addition to driving the casino boom, what positive effect has it brought to the Chinese economy?Why is China's stock market so deformed?The key is that the listing opportunities in the Chinese stock market are mainly reserved for state-owned enterprises, and there are very few listing opportunities for real private enterprises. The China Securities Regulatory Commission has blocked the listing channels of private enterprises.That way, no matter how crazy the stock market gets, few people think that they can start a business and create a supply of stocks to make a lot of money from the stock market.As a result, the Chinese stock market has no effect on stimulating positive entrepreneurship.

◎Reporter: But there is a phenomenon that I think is worth studying. Why are most of China's truly entrepreneurial and innovative companies listed overseas? Chen Zhiwu: I think our Chinese stock market is openly encouraging a culture of rewarding the poor and punishing the good.The stock market is monopolized by the government. In the future, a large number of listing indicators will be given to some inefficient state-owned enterprises, and ordinary people will not have many choices. Limited investment channels are concentrated here, and this "shell" becomes very valuable.As long as it is listed, there is no difference between good companies and bad companies, and it becomes a reward mechanism.The government is actually rewarding garbage companies in this way, and the way of rewarding garbage companies has set a very bad example for the whole society.There is no distinction between good and bad, and by rewarding junk companies, it is actually punishing good companies and good managers in disguise, turning this market into an unfair place.In the end, it became a situation where bad money drove out good money, forcing good companies to either stay away, or follow the bad ones.Because the psychology of those who run businesses honestly is too unbalanced, and those who practice evil ways and blatantly rent-seek all get rich, why should I be a fool?As a result, good private companies have to go public overseas, and those industries that can go public overseas are precisely the industries with the hottest entrepreneurship in China, and are really driven by the stock market.

◎Reporter: Sometimes I am very confused.In China, I often find some companies that have been established completely in the market competition. They have great genes, such as being a private small boss without relying on the background, making bean paste to become a national famous brand, and running a hot pot restaurant. A company that can become a national chain should have great investment value.If I were an investment bank, it would be a good business to help these companies list. As the China Securities Regulatory Commission, letting these companies go public would also be good for optimizing the country's economic structure. Chen Zhiwu: This question confuses us all.This question should of course be asked to the securities regulatory department.For example, South Beauty, which is engaged in catering, belongs to the type of enterprise you mentioned. I heard that they are going to go overseas for listing some time ago.However, the document issued by the Ministry of Commerce last year restricting foreign mergers and acquisitions and restricting the takeaway of assets of domestic enterprises has now blocked the way to overseas listing.As a result, the situation that emerged is that it is difficult to go public domestically or overseas, which inhibits the way out for people to start a business, and forces more people to speculate in the stocks of state-owned enterprises. China's stock market culture is very unhealthy. The best way to profit from the stock market is to inspire more people to start businesses, and then have a smooth path to listing on the stock market, so that entrepreneurs have the opportunity to realize the fruits of success and investors Sharing benefits, instead of people all over the country gambling around a few stocks with low investment value.So far we have only seen a wave of speculation in China's stock market wave, which has not had the effect of optimizing the quality of economic development. It can be said that we are missing an important historical opportunity. ◎Reporter: In the future, more state-owned shares will return to the market, which may at least give shareholders more choices. What do you think? Chen Zhiwu: This is what worries me too.A large number of state-owned enterprises have entered the securities market, and the seesaw of the securities market is mainly tilted towards state-owned enterprises, making the rules of the securities market even more unfair, because the securities regulatory department, law enforcement and judicial departments may naturally favor state-owned enterprises.The monopoly of some state-owned enterprises not only damages social efficiency, but also is too large and powerful, and it is always at the deputy ministerial level, which also makes it very difficult for the procuratorate to supervise and investigate these enterprises. Such a securities market must be very turbid. ◎Reporter: The financial industry can be seen through this bull market. On the one hand, it is a star industry, and on the other hand, the rules are not transparent.It's hard to tell whether a person's investment level is high or low. You can't compare it like a super girl.If a Chinese has a reputation like Buffett, he can make money with his eyes closed, because once the news spreads that "Buffett bought a certain stock", everyone will go after it, and the desire in the stock market can be realized by itself. His finger became Goldfinger.In this way, I think the strength of the financial industry can easily form a new closed, monopolistic interest group or aristocratic alliance. Their temptation to risk corruption will harm the public interest. Chen Zhiwu: The risk of moral corruption in the financial industry certainly exists, because financial bills or securities are property rights certificates that are separate from physical property, so they are easy to be faked and hyped.This is why I have always emphasized the need for an independent and efficient judicial system and an open and free media.For example, a few years ago, New York State Attorney Spitzer punished some big brokerage firms; independent media is also indispensable.Only when these independent forces with different orientations compete with each other under a constitutional framework and produce checks and balances can there be a healthy financial market structure.If any force dominates without check and balance, it may be fine in the short term, but it will do great harm to society in the long run. In addition, the financial industry itself must be sufficiently open, open to private enterprises and foreign capital, and encourage competition and talent flow as much as possible, in order to be healthy and reduce these negative impacts. ◎Reporter: When it comes to the opening up of the financial industry, I have some strange experiences in China's financial services.For example, the interest rate in our bank is very low, and saving money is a loss. I thought about it a few years ago. If Sun Dawu’s chickens are raised well, and I trust his character, he needs financing and is willing to pay me more than the bank. Interest, or let me buy shares, I think this is a good thing for the country, society, entrepreneurs and myself. Chen Zhiwu: This is of course the simplest and simplest common sense.However, China's financial industry, especially banks, is actually monopolized by the government and crony institutions. Banks pay such low interest rates, and at the same time printing money causes inflation to be higher than interest rates. This is actually quietly transferring money from the pockets of ordinary people to In the government's pocket is a tax collection method in disguise.What's even more frightening is that after the financial industry is monopolized by the government, the state-owned banks not only pay low interest rates, but I also don't allow other people to pay high interest rates to steal my business. are social welfare and efficiency.Under the official monopoly of the financial market, some very strange policies are often introduced, which tend to set the threshold for industry entry very high, so that others cannot enter.There is also a limit to things that should be priced by the market. For example, the regulatory authorities actually set a lower limit for the management fees and handling fees of open-end funds, so that fund investors cannot enjoy the benefits of competition; the same is true for investment banks charged by securities companies , For example, the share reform consulting fees in the previous two years also set a lower limit, which is simply too strange.Generally speaking, regulators tend to set price caps because they are afraid that the monopoly position of service providers will allow them to raise prices at will.In China's financial industry, regulators often set lower limits and directly exploit ordinary people, which is incredible. ◎Reporter: But our government's consideration also has its righteous side.Government-run finance has high thresholds and high costs, but at least it is more reliable. If the government does not collapse, the accountant will still be there.However, private risks will be greater, and some fundraising will make ordinary people lose their money.Of course, a lot of private fundraising is also demonized. Chen Zhiwu: That is the result of the government squeezing the market.The more and stricter the government controls, the harder it is for market discipline to have an effect.In a highly regulated society, even private enterprises will focus on building relationships with the government instead of going all out to establish and maintain their own independent credit.Because after getting through the relationship with the government, it doesn't matter even if your company has no reputation, as long as you have the help of the administrative department anyway.Therefore, the more government controls, the more people will rely on state-owned enterprises and the government.If the government is always omnipotent, it will go the opposite way, and the people will have no room for development, and they will go further and further apart. The benefits of opening up access to funding are huge.Take the local laws of Connecticut, where I live, as an example, for private equity funds, as long as the fundraising is less than 20 million US dollars and the number of people does not exceed 99, the government will not interfere at all, and the contract law will completely constrain the relationship between investors and managers. relation.Even if it exceeds, at best it is a filing and registration.Generally speaking, the government has no place where ordinary people can start businesses in terms of licenses.This brings a lot of convenience to entrepreneurship in this society, and the mobilization of social resources is more effective. ◎Reporter: It is estimated that many people in China will disagree and feel that it is not in line with China's national conditions. What should I do if it gets messed up? Chen Zhiwu: As long as the social media is free enough and information circulates sufficiently, this situation should not happen.Moreover, such a society will be more self-responsible and contract-aware. Whatever you do, you have to think about it and sign the contract at the beginning. The contract is to take the worst case into consideration. If the investment fails, then we will handle it according to the contract.In this way, society can cultivate a spirit of contract.Moreover, such a society can cultivate a sense of credit.Because credit is your most basic survival condition in the financial field, if everyone thinks that your character is not good, or you have a bad record of defrauding friends in the past, and now it is an information society, if it spreads quickly, who would dare to invest in you?Everyone and companies are responsible for their credit.