Bull or bear it doesn't matter, the Party is in control

The popular success of stock market investments in recent years is one of the most visible symbols of fast moving China.

While most young people invest online, the older generation prefers to go to public stock market rooms where they can check live on huge screens both Shenzhen and Shanghai markets and invest.

China Galaxy Securities Ltd owns two floors of a big modern building in Chongqing downtown, where investors can come and invest, providing both a cheap public investment room and private more expensive private rooms upstairs for those that have more to invest.
On top of bearing the name of a famous casino in Las Vegas, the place does look at first sight like a gambling place without the glamour. On one side a huge screen where rising and decreasing stocks appear respectively in red and green (today it’s rather green), on the other side about40 private boots that look like cheap slot machines, where investors can check more in depth the evolution of a particular stock.

The average age here is about 60 years old and the typical outfit is quite remote from the Armani suit and the golden watch. There are old women quietly knitting, while other are heating their lunch box in the microwave oven available to customers. Above the boots, a big line of tea glasses cooling down while their owners are checking complex graphics with various curves in flashy colors.

After spending a few hours here and having interviewed a couple of customers, what is striking is the faith people have in the fact that the stock market cannot crash. About a month and a half ago Shanghai stock market lost about 15% in one day, yet to everybody here, this was only a bump on the road, rather than a warning for a bigger crash to come.
‘It will always go up’ tells us confidently an old woman, and the coming Beijing Olympics brings to them one more reason why the Authorities just cannot let market collapse in the coming 12 months.

Because to all investors we met, the Chinese Authorities fundamentally have control on the Chinese stock market. We ask an old man, who tells us he has lost some money in the last few weeks on the stock market, if he is confident that he will recover soon. His answer is similar: ‘I don’t know, only the high rank officials know that’.

In a country where the saving wisdom has quickly and massively shifted to the thrill of stock investments, this kind of shared belief that the Party is still in control of everything happening at Society level could cause big social upreasal against the central authorities, if the stock market were to crash.

That may be why the government is doing so much to avoid that…making investors right to hold to their belief…