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So why are people then trading stocks in China or India or wherever if they don't trust the system? They wouldn't be able to become the largest stock markets if

• khuey 11y ago
  Where else is your average Chinese person going to trade stocks, especially given the government's capital controls?
  • danbruc 11y ago
    Don't trade stocks. If this is no option for whatever reasons it would still be a problem contained in China if all the outside investors stayed away.
    • jfoutz 11y ago
      I think you're underestimating how pervasive the stock market is in doing stuff. Say, foxconn wants to build a new factory. they put up stock as collateral for a loan to pay for it. Stock crashes. They have to sell existing assets to cover the loan. Even if they retain control by selling to a trusted partner, the asset shift is painful. If you can imagine foxconn getting into that trouble, it's very easy to imagine them not being able to manufacture IPhones or Galaxys for a few months while they negotiate contracts with the new asset owners. Any idea what that would do to Apple stock? And, you know, your 401k? This is an extreme example, but captures the spirit. when suppliers go out of business, or even run into trouble, all the companies that depend on them slow down, have to renegotiate new contracts, possibly miss deadlines. It can be ugly.
• CSMastermind 11y ago
  Because you can still make money in the short term. The lack of transparency means that every dollar you invest there has extra risk attached to it. This discourages long term and large investments while promoting short term thinking and risky behavior.
  • danbruc 11y ago
    Then they shouldn't complain - they get what they signed up for.
    • pekk 11y ago
      When a lot of the economy depends on volatile markets, there are negative externalities. In other words, it doesn't just affect the people who are using the market to gamble.
    • rrrx3 11y ago
      They don't know enough to complain. That's a major part of the problem. Signing up is compelled by misrepresentation of the entire system, the whole way through.
    • oxryly1 11y ago
      The people engaging in risky behavior aren't complaining. They're selling (or trying to).
    • CyberDildonics 11y ago
      China has significant capital controls, they don't have many other options.
• lmm 11y ago
  Some may have been leaned on by the government to participate. Some did trust the system to start, and are now struggling to get out. Some thought they could make a quick buck.
• mtgx 11y ago
  Why do people gamble hoping they "win"? It's the same principle here.
• placeybordeaux 11y ago
  Holding cash is a losing strategy long term, plenty of money has already gone into real-estate. They can't expatriate their money, where else is it gonna go?
  • e15ctr0n 11y ago
    The Chinese are expatriating plenty of money; just ask anyone trying to buy a single family home on the US and Canada west coast. See http://www.nytimes.com/2015/11/29/business/international/chinese-cash-floods-us-real-estate-market.html http://www.nytimes.com/2015/11/29/business/international/chi... and its discussion https://news.ycombinator.com/item?id=10645768 https://news.ycombinator.com/item?id=10645768
    • CyberDildonics 11y ago
      You are talking about two different economic classes. It takes a few hundred thousand dollars to move immigrate to Canada and it takes more to be a housing speculator.
• braythwayt 11y ago
  > So why are people then trading stocks in China or India or > wherever if they don't trust the system? If you're speculating, i.e. purchasing for the sole purpose of selling it to someone else, who is also speculating, it doesn't matter whether the system is trustworthy, it only matters whether there is a "greater fool" standing ready to trade with you. If the perception is there that people are trading in these markets, people will trade in these markets. But without fundamentals, the whole thing can quickly suffer from a collapse in confidence, followed by a "run." It's no different than buying Bitcoins. Why speculate in bitcoins? Because other people are speculating in bitcoins.
  • solotronics 11y ago
    I have been playing a fun game where I see if a financial article on YC has bitcoin mentioned in the comments. It is in basically every comment section of anything related to finances. Personally I speculate in Bitcoins as a hedge against variations in cash and stocks. I like to think of it as e-gold that has some advantages and disadvantages versus a solid asset like gold. Due to the increasingly global and digital nature of our existence I think BTC has a very high potential upside.
• xyzzy4 11y ago
  Well the stocks aren't worth 0, and they aren't worth infinity. So they will always have some price worth trading.
• bzbarsky 11y ago
  > So why are people then trading stocks in China Non-rich Chinese people are doing that because the government has been pushing it pretty hard (think the way state lotteries are pushed in the US, or fantasy sports, with pretty much the same returns, really). Oddly enough, said non-rich Chinese people are also the ones China is trying to protect with its market stabilization efforts, or so it claims. I'm really not quite sure what they _think_ they're doing there. Apart from that, it's pretty much all people looking to make a quick speculative yuan.