The official Xinhua News agency report was refreshing in its bald acceptance of the realities – it said that a survey had revealed that 77% of all stock investors lost money on the Chinese stock markets in 2005. A pretty dismal result, especially given the performance of other markets around the world.
It is their own fault, of course. For years, analysts have been telling the market regulators what needs to be done – list good companies, and require listed companies to be transparent. The Xinhua report suggests they are finally getting the message.
The problem is that the markets started off in the early 1990s on the wrong foot. The principle, unstated perhaps, was that the B-shares were created to scam money off foreign investors and A-shares were created to scam money off Chinese investors. The result was the 2005 performance of China’s stock markets.
The market that benefits most is Hong Kong, which is going to see a large number of China IPOs in 2006. Even the China market regulators are encouraging companies to list outside the mainland. The huge overhang of non-listed shares needs to be digested before a new wave of listings can take place – that, and the prospect for stock investors that investing in the market could provide a return.
But the Xinhua story is a good sign. Let’s hope more follow.
The indications are that Taiwan’s president Chen Shui-bian is losing the plot. He announced in early January that the priority for the last two years of his presidency would be to strengthen Taiwan’s national identity, and to resist a strengthening of economic ties with the mainland.
"The government must pro-actively take on the responsibility of management in order to effectively reduce the risks of liberalization," he said. The Taipei stock market fell, but the KMT opposition and Beijing were probably delighted. It simply makes a KMT victory in the 2008 elections all the more certain, which will alter the entire balance in the Taiwan situation in Beijing’s favor.
Taiwan business people figured it out some time ago – China is too big to ignore. Taiwan’s future is linked to the mainland. The question is, what are the best terms obtainable for a reconciliation, and what is the role of Taiwan in the future of Greater China.
A major puzzle out there in the world of China-watching is party chief Hu Jintao – is he a conservative or not? What do these media crackdowns mean? The conclusion is often that he is a hardliner and that the Communist Party is, as it always was, determined to stifle dissent and alternative views of all kinds. My view would be that appearances can be deceptive.
I would say, or rather guess, that Hu is fundamentally a liberal, in the sense that he is working fundamentally for change. I think he is under pressure from the conservatives in the party who feel lost in a world that is increasingly online and out of their control, and uses high-profile media crackdowns to make them feel more at ease. I think he is also concerned about losing control of the rate of change. But I believe his actions overall indicate an awareness that the direction of change is inevitable.
You just don’t hear him say it, because he says – probably wisely – almost nothing in public. He is the most silent leader modern China has ever had – which leaves people with no alternative but to guess. My feeling is: ignore the surface static, and focus on what is quietly happening underneath – which is the assumption that the West has got it right on information flow.