China’s Richest Man: Capital Markets suck in China

When people’s options to invest have been restricted via financial repression measures such as taxes and capital and currency controls, and when people savings are being surreptitiously taxed via inflation for the benefit of the political class, and likewise given the above political conditions when people have been unwittingly drawn to yield chasing or inflation hedging dynamics via property bubbles which “perhaps is the largest in human history”, one can’t help but partly commiserate with this striking comment from the richest man in China

From the Wall Street Journal:

China’s richest man has a strong statement for those looking to invest: “The capital markets suck in China.”

Zong Qinghou climbed his way to the top of the list of China’s wealthiest by amassing a fortune of $12.6 billion through his privately listed beverage empire Hangzhou Wahaha Group Co. On Tuesday, he made clear he didn’t gain his wealth through the country’s stock market.

“When the ordinary people invest in it, the market should reward them with some benefits. But it does not,” Mr. Zong said on the sidelines of China’s annual parliamentary session, taking aim at speculators he says ruin the stock market for others. “The speculation has totally cheated ordinary investors of any benefits.”

The sentiment of the billionaire, who is also an NPC representative, speaks volumes about the state of the country’s capital markets, highlighting the monumental obstacles investors face in China as they look for places to park their money in hopes of a return.

Yet his comment does not say on what motivates people to speculate and by what mechanism such rampant speculation morphs into boom bust cycles. Instead he mistakes interpreting symptoms as “insider trading” as the disease.

Shifting culpability to the public seems typical of political agents. Mr. Zong hasn’t just been a “rich” businessman but a representative of China's legislative body, the National Public Congress, thus a likely political entrepreneur.

In reality, since no one knows the future, everyone speculates. Such knowledge problem includes, or most importantly, applies to politicians.

And Mr. Zong doesn't need conspiracy theorists, global central bankers have been the biggest manipulators (insider trading) of the marketplace.

In addition, in 2004 there had been 942 publicly listed state owned enterprises (SoE), 52 of which had been directly owned by local governments (OECD). Mr. Zong can start looking for his "insider" bogeyman from them.

Nonetheless, when capital markets, not limited to China, are being propped up, manipulated or subjected to political interventions, to borrow Mr. Zong's fitting comment, they "suck".