Fluctuations in the stock market are normal, but following the China Venture Capital stock manipulation case in 2000 and, in particular, after the plan for the costly reduction in state-held shares was revealed in 2001, the securities markets in Shanghai and Shenzhen have fallen and do not seem likely to rebound.
Even though the reduction in state-held shares since has been forced to stop, the corrupt practices of the securities markets and the fact that the government is using the stock markets to rob the people of their wealth has been fully revealed.
Just like most of the Chinese Communist Party's policies, the stock markets lacked democratic decision-making when they were first introduced. The late Deng Xiaoping (鄧小平) rashly treated such an important matter as an experiment, saying that if it worked, then it could continue, but if it did not, it could be discontinued at any time.
In order to protect the party's absolute control of the social economy, party institutions and the state hold the largest share of the stock in listed companies while local governments compete with each other to falsify accounts and lie in order to have local companies listed on the stock exchanges, treating these substandard, so-called joint-stock companies as money trees.
In such listed companies, there are no guarantees for the interests of medium and small investors. Media control and an unfair legal system block investors from obtaining correct and timely information, and they are also unable to effectively protect themselves once their interests are violated. The behavior of listed enterprises which, according to public data, enjoy substantial profits but are refusing to pay dividends to shareholders are protected by the Securities Regulatory Commission. This causes stock markets to provide only speculative and no investment value.
After former premier Zhu Rongji (朱鎔基) came to power, the promotion of the idea that the stock markets should assist the reform of state-owned enterprises in order to maintain so-called stability was actually a policy aimed at plugging the black hole in state-run enterprises. Zhu gave tacit approval to and even permitted market insiders to do as they pleased by using People's Daily editorial space to encourage the irrational growth of the stock markets.
Zhu's policy has delayed the demise of some state-owned enterprises at the expense of countless investors and their hard-earned money, but it did not regulate the behavior of listed companies. Top leaders from many companies joined hands with market insiders to fabricate operational results and wantonly cheat the general investor.
After 2001, shareholders realized that a stock market with no investment value also won't maintain its speculative value in the long run. Shareholders know they still face a long period of decline. The attitude of most of them is to wait for the stock index to increase before pulling out, but with everyone reasoning like that, will stock markets allow them a chance to do so?
Back when the Shanghai General Index was growing, the media used two platitudes -- "The Chi-nese economy is outstanding" and "The stock markets are an indicator of the national economy." You should not expect them to repeat such things now. But when the news of the SARS outbreak in Guangdong was suppressed by the party, the share prices of companies producing vinegar and Isatidis Radix products saw great increases. This shows that the stock market is an extremely sensitive part of the economy. Knowing about positive changes before everyone else, the stock markets reflect the actual economic situation and also forecast the direction of the Chinese economy.
Wang Dan was a student leader during the 1989 Tiananmen Square demonstrations.
Translated by Perry Svensson
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