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The allure of China’s volatile stock market

Published: 14 Oct. 2024, 19:52

HAN WOO-DUK
The author is a senior reporter of the China Lab.

Wang Feng is a young Chinese man who graduated from college last year. He, too, could not avoid youth unemployment. After failing to find a job, he started working as a delivery man. Wang is diligent and hard-working and saves up what he earns. He now has 30,000 yuan ($4,235) in his bank account.

Late last month, his friend suggested investing in stocks, and he opened an investment account. He invested 20,000 yuan on a stock that his friend recommended. The stock price surged, and he made 4,000 yuan in two days, which is what he makes in a month. He could not focus on the delivery work anymore. Now, he spends all day studying the stock market on a trading site. “Should I quit my delivery job and become a full-time day trader?” This is an example of the stock market boom reported by Chinese media outlets.

China is experiencing another stock fever. Since Sept. 24, the authorities announced massive economic stimulus packages, and the stock market is soaring. The Shanghai Stock Exchange has recovered a three-year decline in only six business days. Securities companies are delighted with flooding inquiries to open accounts. They operated normally during the national holiday season from Oct. 1 to 7 to accommodate customers.

Many of the inquiries were made by young people. More than half of the new accounts opened before and after the holiday were by people in their 20s and 30s. A total of 30 percent of Sinolink Securities’ new customers were between 25 and 30, and about 20 percent were under 24. Wang Feng is one of them.

Will they be okay? China is the world’s second largest economy, but its capital market is still lagging. Stock prices fluctuate by government policies rather than being determined by market demand. The stock price reflects the characteristics of the Chinese economy where policies dominate the market. Frequently exposed corruptions also stain the stock market. Therefore, stock prices go up and down drastically. However, Chinese people still flock into the stock market when stocks go up.

It is still hard to be optimistic about the Chinese economy. More than 10 million college graduates will be produced this year, but private companies, which supply about 80 percent of the urban jobs, are still sluggish. Young people who haven’t found permanent employment engage in part-time jobs. To them, the recent stock market surge is tempting. Even a diligent young man like Wang Feng is contemplating whether to invest all his savings in the fluctuating market. I wonder what choice he would make.