Commentary on Political Economy

Wednesday 14 February 2024



What a Viral Post on Giraffes Says About China’s Fed-Up Investors

As their losses pile up, Chinese investors are losing confidence not only in the stock market but in the government’s ability to turn the economy around.

An illustration shows an overhead view of office partitions surrounding empty chairs and people looking with dismay at negative stock charts on the partition walls. The partition opens up at one end, and people walk out through the opening.
Credit... Xinmei Liu
Li Yuan

Like many Chinese people, Jacky hoped that he could make enough money investing in China’s stock markets to help pay for an apartment in a big city. But in 2015 he lost $30,000, and in 2021 he lost $80,000. After that, he shut down his trading account and started investing in Chinese funds that track stocks in the United States.

It’s a perilous time for investors in China. Their main vehicle, so-called A shares of Chinese companies, fell more than 11 percent in 2023 and have continued their losses this year. Many investors have instead flocked to the exchange-traded funds that track foreign markets and that have been performing much better.

Putting money in stocks is inherently risky. But Chinese investors are experiencing something especially alarming: financial losses in the markets, declining home values and a government that doesn’t want any public discussion of what’s happening.

With their frustrations piling up, Chinese investors recently found a way to vent that wouldn’t be quickly censored. They started leaving comments on an innocuous post about giraffe conservation on the official Weibo social media account of the U.S. Embassy in China. They lamented the poor performance of their portfolios and revealed their broader despair, anger and frustration. The giraffe post has been liked nearly one million times since Feb. 2, much more than what the embassy’s Weibo posts usually get. Many of the comments also offered admiration for the United States, as well as unhappiness about their own country.

“The different stock markets’ performances reflect the distances between America and China in terms of national power, technology, humanity and sense of well-being,” a commenter wrote.

The comments demonstrate a growing loss of confidence by the Chinese public in the stock market, the country’s economic prospects and the Chinese Communist Party’s ability to govern.

“Their reactions are more than about losing money in the markets,” said Jacky, an analyst in the manufacturing industry who is earning half of what he was making two years ago and is juggling several jobs. “The venting probably serves as an outlet for their accumulated frustrations in life.”

Police officers and other individuals standing outside an office building while Xi Jinping appears on a large screen visible through the glass facade.
The offices of the China Securities Regulatory Commission, whose leader was removed in a move seen as an attempt to bolster investor confidence. Credit... Pedro Pardo/Agence France-Presse — Getty Images

Another investor I spoke to, Leo, a portfolio manager at an asset management company in Beijing, has been investing in China’s stock markets for nearly a decade. In November, he started closing out his positions. Now, like Jacky, he is placing his bets on overseas markets.

Leo said he used to hope that China’s internet giants Alibaba and Tencent would become $1 trillion companies like Amazon, and that investors like him would benefit from their growth. “That dream was shattered” after the government cracked down on tech in 2020, he said. “I can only look to the overseas markets now.”

The American Embassy’s Weibo comments section once served as an online punching bag for nationalistic Chinese who blamed the United States for their country’s problems. Now it’s called the Western Wall of China’s A shares investors.

“Under the protection of the U.S. government,” wrote one commenter, “the giraffes are 10,000 times happier than the Chinese stock investors.”

In a tightly controlled society like China’s, it’s rare to see such a robust expression of public sentiment. The comments could also serve as a harbinger if the economy doesn’t recover soon. Despite being bombarded by propaganda and intimidated by the government, people may continue to question their government and find creative ways to express their discontent.

It’s always tough to gauge public sentiment in China. People dare not publicly say anything critical about their government. Now even critical comments about the economy are censored and punished. That’s why both Jacky and Leo asked me to use only their English names for fear of reprisal.

Still, online outbursts by large groups of people can offer clues about public sentiment. Take, for example, the grief that followed the death of Li Wenliang, a doctor who blew the whistle in the early days of the pandemic. And the widespread mourning after the unexpected death last year of former Premier Li Keqiang, a reformist politician who accomplished little under the country’s leader, Xi Jinping.

Those episodes showed the public’s disapproval of censorship and doubt about the direction that Mr. Xi is taking the country. The comments on the U.S. Embassy’s Weibo account belong in this category.

Valuable insights into what people are feeling occasionally emerge in unexpected places. A recent survey by the Canton Public Opinion Research Center offered a bleak picture from the southern city of Guangzhou, a metropolis of nearly 19 million people and a hub of technology, manufacturing and trade. In a 2023 survey of 1,000 residents, the center found that the city’s “economy and the society were confronted with unprecedented challenges and pressure.”

The research center’s report said residents’ assessment of the economy, because of unemployment and falling incomes, was as low as it was in 2015, when China’s markets tanked. Satisfaction with the growth of the private sector dropped below 30 percent, the lowest level since the question was first asked in 2008. Most residents said they didn’t expect their incomes to improve in 2024, and more than 20 percent said they believed they were “likely” to lose their jobs.

News coverage about the survey was censored, and the report can’t be found on the center’s website.

The survey results wouldn’t be surprising to investors.

Jacky, who is in his mid-30s, lost his job at a private equity firm in 2022. He had to take a deep pay cut when he moved back to manufacturing. He fears he is “on the verge of falling off a cliff.”

Leo, who was born in Beijing in the mid-1980s, said he had grown up as a nationalistic “little pink.” The first crack in his confidence, he said, was in 2021 when the government went after internet companies. The second crack appeared when the government abruptly ended its “zero-Covid” policy in December 2022 without preparing the population with effective vaccines or medications. Then in late July, the markets and the private sector failed to respond to government measures to stimulate the economy.

Visitors walk by an Alibaba stall in an expo event.
A display by the Chinese technology firm Alibaba at the PT Expo in Beijing last year. Credit... Mark Schiefelbein/Associated Press

Leo’s change is remarkable. He said local Beijing residents like him and the people with whom he had gone to high school were among the stoutest supporters of the Communist Party’s rule because they benefited from the city’s expansion and the country’s growth.

When a group of Leo’s classmates met up in June, he said, they couldn’t believe that two of them, a couple, were migrating to Canada. When they met again last month, he found that a few of his classmates had opened bank accounts in Hong Kong, which, unlike the mainland, has banks that are connected to the global financial system. They asked him how to convert their savings in renminbi to U.S. dollars and transfer them to Hong Kong.

“They’re preparing for the worst-case scenarios,” he said. “No one laughed at the two classmates who migrated to Canada any more. In fact, we’re jealous of them.”

I asked Leo what would have to change for him to invest again in the A shares market.

He said the big problems that had made him flee remained unsolved: the imploding real estate sector, enormous local government debts and a fast-aging population.

He said that he wanted the government to loosen its grip on private enterprise and disband Communist Party branches that had proliferated inside companies, and that he wanted the private sector to start to invest again. Until then, he will keep his money out of China’s markets.

And what investing advice would he give to his families and friends? “Run as fast as you can,” he said, “even at a loss.”

Li Yuan writes the New New World column, which focuses on the intersection of technology, business and politics in China and across Asia. More about Li Yuan

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