9 ms·

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they r

by 21 8y ago

In the last 5 years retail Chinese investors had massive losses in bitcoin, gold, the local stock market, bitcoin again, now P2P. Is it fair to say that they rush from one investment fad to the next, typically buying the top? This is how it looks from far away, can someone with local knowledge comment? http://static.atimes.com/uploads/2015/07/retail-investors.jpg http://static.atimes.com/uploads/2015/07/retail-investors.jp...

seanmcdirmid 8y ago
They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.
- tonyedgecombe 8y ago
  The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.
  - vkou 8y ago
    The markets in the US, following 2008, were artificially sustained, too. How hard will they crash?
    - seanmcdirmid 8y ago
      The US was allowed a crash at least. As for how much we will pay for low interest rates later, I'm sure it will be something bad in the next crash. China has kept pumping up its bubble unreasonably so since the mid-2000s. It has a third-world problem compared to the USA's first-world one.
      - vkou 8y ago
        This may be an unpopular opinion, but in a low-growth first world - which we are probably living in, now, interest rates have to be low.
        opportune 8y ago
        not an economist, but during periods of wage-inflation (i.e. now or soon), won't interest rates need to increase to prevent the economy from "overheating"?
        varsitywork 8y ago
        US will see high growth because the money that was loaned to emerging markets are coming back. US recorded 4% gdp growth in Q2.
        toomuchtodo 8y ago
        A significant portion of Q2 GDP was China pulling forward commodities purchases prior to tariffs going into effect.
  - cm2187 8y ago
    Actually the europeans are following a similar logic. Try to cushion the pain, amortize it over a long period, hope the problem goes away by itself. You end up 10 years after the financial crisis with an unhealthy banking sector, high unemployment, etc. So it doesn't have to crash but you basically end up having to live with the problem instead of fixing it. The US approach of taking the pain upfront and starting clean works better in the long run in my opinion.
    - seanmcdirmid 8y ago
      I think the Japanese perfected that approach with their lost decade.
      - adventured 8y ago
        Japan would be thrilled with just a lost decade. It's a 25 year blackhole of destruction and counting. Before adjusting for inflation, their GDP is at 1994 levels in USD terms. If you adjust for inflation, it's a brutal rollback. Not only did they stagnate on economic output, they accumulated extreme amounts of debt, heavily debased the Yen, saw their savings rate drop to near zero, and lost their demographics age wise. They have to perpetually destroy their economy via currency debasement until the national debt is effectively defaulted on to a high enough degree that they regain economic breathing room. The net result of that is vast wealth lost, and a gradual adjustment down in relative terms for their economic standing vs other nations (they've fallen from a top five GDP per capita nation, to number ~20; most likely that down trend will continue at least until they're between Spain and Taiwan in rank).
        21 8y ago
        > heavily debased the Yen What debasing? USD/JPY has moved around 110 for 20 years now.
        ahakki 8y ago
        That‘s the point. The US had growth in the past 20 years, Japan did not. So the Yen shoukdn‘t have been at a steady 110.
- baybal2 8y ago
  Well, there was a number of bank/property broker runs around the country, in second tier cities and below. The party is far from being almighty. There was a huge number of other things that people were betting CCP will not let crash at all costs, but which nevertheless crashed: from currency, to stock market, to rural lending cooperatives (google that, it think their crash had impacted close to 1 in 3 or 4 people,) and on and on China is no stranger to totally catastrophic financial crashes. Things like 2008 in US happen here every 4-5 years, but people seem to barely notice them.
  - stephengillie 8y ago
    Please don't use racist terms to describe Chinese people who believe in Communism.
- baybal2 8y ago
  >or at least the landing must be soft. The state, has valid legal pretext and a joker in the sleeve: the special interpretation of article 149 of property law. Not a single municipality in China ever honoured the textualist interpretation of the law, in all and every case ever going to court over article 149, the outcome was that the state can't deny the automatic lease extensions, but it leaves municipality the privilege to set conditions. And yes, Shenzhen municipality was very very happy to resell property sold on 15 and 20 year leases. And people who were previous lease holders were royally fucked because they paid for property with 15 and 20 years leases as much as for a 70 to 50 years lease.
  - seanmcdirmid 8y ago
    I thought that was Wenzhou, not Shenzhen. I didn’t hear of any lease issues happening there, not that I don’t believe you, but got a source where I can read more?
    - baybal2 8y ago
      Both Wenzhou and Shenzhen had 20 year leases, and I think only SZ or Shantou had 15 year ones. These days, I think, only far inland cities still do 20 year leases, and BJ experimenting with shorter term 3 to 5 year ones. I found these: >Most of this happened before the property boom began at a national level. So it is those cities that set the early pace in residential property development that have been first to encounter the issue. Wenzhou is one of them. Shenzhen, China’s oldest special economic zone, is another. A few property owners there started experiencing problems about 15 years ago. In that case most were given an option to renew their expired titles by paying 35% of a ‘baseline land value’, calculated on a historic rate far lower than the prevailing market price, Guangzhou Daily has reported. >https://www.weekinchina.com/2016/04/a-nation-of-homeowners/ https://www.weekinchina.com/2016/04/a-nation-of-homeowners/ I the end, Wenzhou's leaseholders got free extension, but most likely just to shut them up. The govt did not yield to demands on relinquishing the right to set lease extension conditions. More on that in Chinese "ministry of land and resources decision, 23rd december" I myself think that government's blessing on short term leases, (edit) plus hefty property tax on regular real estate seem to be the most logical way out of China's housing bubble.
- rasz 8y ago
  >They’ve done well on real estate. sure https://www.youtube.com/watch?v=XopSDJq6w8E https://www.youtube.com/watch?v=XopSDJq6w8E
rb808 8y ago
Its fascinating to think about the knowledge of investors in China. How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty and communism) Combined with Chinese people all saving too much and not spending on consumption - there is a huge pool of money just floating around going into every possible asset. Its a bad combination that has to end badly sooner or later. (I've been saying this for 15 years but proved wrong every year).
- stephengillie 8y ago
  > How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty ...) Many study Finance for this education. At least in America, Europe, Africa, Japan, Korea, etc.
  - ummonk 8y ago
    Don't know about the other regions/coutnries (I imagine it is the same), but only a miniscule fraction of Americans have studied Finance.
- chibg10 8y ago
  This is getting downvoted (perhaps due to the rough tone) but there's a lot of truth to it. It's part of a larger phenomenon that isn't limited to investing as well. I think a lot of inexperienced outside observers of China from developed countries tend to miss that while some parts of China now have many of the trappings of developed nations, the rapid pace with which China has evolved means that they lack a lot of the knowledge that developed countries have about how to effectively manage/use these trappings. Take driving for example. Cars are everywhere in Chinese streets these days, but most of them appeared in the last 10 years. Imagine being in a city where everyone is a new driver, and nobody's parents ever drove and thus couldn't teach them to drive. The same goes investment as well, and in many other areas. This isn't to say that there aren't a lot of smart Chinese who read stuff on the internet/learned in school/figured it out on their own (there are), but the aggregate cultural knowledge level in a lot of things people in developed countries take for granted is often noticeably more undeveloped in China. They'll no doubt grow out of it with time though (and hopefully without any significant catastrophes).
MichaelMoser123 8y ago
How did they get losses in bitcoin, given that the cryptocurrency had only been rising? Is that due to regulation?
- guessthejuice 8y ago
  BTC was trading at nearly $20K just a few months ago. Now it is trading at $6K. How is going from $20K to $6K "only been rising"? A lot of people are underwater when it comes to bitcoin.
  - udontgetbtc 8y ago
    I mean, lets be real... bitcoin traded at 20k for about 5 minutes. The extreme spike in price was over a 2 week period. The 6k figure is roughly where bitcoin was trading in October 2017 - after a year long runup from ~$500. Anyone who bought just 10 months ago still had better returns than the stock market over the same period.
    - greenleafjacob 8y ago
      The spike in price also caused a spike in popularity...
  - UlisesAC4 8y ago
    It is ok. But keep in mind that in the overall graph BTC trend is upwards. You only lost if you were actively trading on December.
    - rhino369 8y ago
      It was going up because new speculators were jumping in. And those new speculators are all underwater.
SuoDuanDao 8y ago
I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the restaurant problem. Abstracting that decision-making style to retail investing in a country with a bias towards savings, and the nature of Chinese equity markets makes a lot of sense.
- sremani 8y ago
  >> always goes to busy restaurants on the assumption that a lot of customers means they have good food. It is actually good heuristic, I would just modify it ever slightly.. lot of customers means that they will not serve "stale" or yesterday's food.
  - finebalance 8y ago
    That's actually a very useful heuristic because, unlike perhaps in the US, in many parts of the world food standards even in higher quality restaurants are rather lax.
    - Larrikin 8y ago
      Even in the US I learned the hard way about eating lunch early. Chipotle is perfectly fine with serving old steak from yesterday if you're one of the first customers of the day.
      - windows_tips 8y ago
        Overnight-marinated special.
      - reaperducer 8y ago
        I was told once that Wendy's chili is made from the hamburgers that weren't sold the day before. I don't know if it's true or not, though. Even if it is, that's some fine chili for a chain fast food restaurant.

by 21 8y ago

seanmcdirmid 8y ago

They’ve done well on real estate. The government would never let the real estate sector crash, the bubble must be maintained at all costs, or at least the landing must be soft. Well, thats the hope anyways. I think that sector will crash eventually, but they’ve kept it going for so long.

tonyedgecombe 8y ago
The more they artificially sustain that market the harder the crash will be. It will be painful but I still hope something like that would create democratic reforms.
- vkou 8y ago
  The markets in the US, following 2008, were artificially sustained, too. How hard will they crash?
  - seanmcdirmid 8y ago
    The US was allowed a crash at least. As for how much we will pay for low interest rates later, I'm sure it will be something bad in the next crash. China has kept pumping up its bubble unreasonably so since the mid-2000s. It has a third-world problem compared to the USA's first-world one.
    - vkou 8y ago
      This may be an unpopular opinion, but in a low-growth first world - which we are probably living in, now, interest rates have to be low.
      - opportune 8y ago
        not an economist, but during periods of wage-inflation (i.e. now or soon), won't interest rates need to increase to prevent the economy from "overheating"?
      - varsitywork 8y ago
        US will see high growth because the money that was loaned to emerging markets are coming back. US recorded 4% gdp growth in Q2.
        toomuchtodo 8y ago
        A significant portion of Q2 GDP was China pulling forward commodities purchases prior to tariffs going into effect.
- cm2187 8y ago
  Actually the europeans are following a similar logic. Try to cushion the pain, amortize it over a long period, hope the problem goes away by itself. You end up 10 years after the financial crisis with an unhealthy banking sector, high unemployment, etc. So it doesn't have to crash but you basically end up having to live with the problem instead of fixing it. The US approach of taking the pain upfront and starting clean works better in the long run in my opinion.
  - seanmcdirmid 8y ago
    I think the Japanese perfected that approach with their lost decade.
    - adventured 8y ago
      Japan would be thrilled with just a lost decade. It's a 25 year blackhole of destruction and counting. Before adjusting for inflation, their GDP is at 1994 levels in USD terms. If you adjust for inflation, it's a brutal rollback. Not only did they stagnate on economic output, they accumulated extreme amounts of debt, heavily debased the Yen, saw their savings rate drop to near zero, and lost their demographics age wise. They have to perpetually destroy their economy via currency debasement until the national debt is effectively defaulted on to a high enough degree that they regain economic breathing room. The net result of that is vast wealth lost, and a gradual adjustment down in relative terms for their economic standing vs other nations (they've fallen from a top five GDP per capita nation, to number ~20; most likely that down trend will continue at least until they're between Spain and Taiwan in rank).
      - 21 8y ago
        > heavily debased the Yen What debasing? USD/JPY has moved around 110 for 20 years now.
        ahakki 8y ago
        That‘s the point. The US had growth in the past 20 years, Japan did not. So the Yen shoukdn‘t have been at a steady 110.
baybal2 8y ago
Well, there was a number of bank/property broker runs around the country, in second tier cities and below. The party is far from being almighty. There was a huge number of other things that people were betting CCP will not let crash at all costs, but which nevertheless crashed: from currency, to stock market, to rural lending cooperatives (google that, it think their crash had impacted close to 1 in 3 or 4 people,) and on and on China is no stranger to totally catastrophic financial crashes. Things like 2008 in US happen here every 4-5 years, but people seem to barely notice them.
- stephengillie 8y ago
  Please don't use racist terms to describe Chinese people who believe in Communism.
baybal2 8y ago
>or at least the landing must be soft. The state, has valid legal pretext and a joker in the sleeve: the special interpretation of article 149 of property law. Not a single municipality in China ever honoured the textualist interpretation of the law, in all and every case ever going to court over article 149, the outcome was that the state can't deny the automatic lease extensions, but it leaves municipality the privilege to set conditions. And yes, Shenzhen municipality was very very happy to resell property sold on 15 and 20 year leases. And people who were previous lease holders were royally fucked because they paid for property with 15 and 20 years leases as much as for a 70 to 50 years lease.
- seanmcdirmid 8y ago
  I thought that was Wenzhou, not Shenzhen. I didn’t hear of any lease issues happening there, not that I don’t believe you, but got a source where I can read more?
  - baybal2 8y ago
    Both Wenzhou and Shenzhen had 20 year leases, and I think only SZ or Shantou had 15 year ones. These days, I think, only far inland cities still do 20 year leases, and BJ experimenting with shorter term 3 to 5 year ones. I found these: >Most of this happened before the property boom began at a national level. So it is those cities that set the early pace in residential property development that have been first to encounter the issue. Wenzhou is one of them. Shenzhen, China’s oldest special economic zone, is another. A few property owners there started experiencing problems about 15 years ago. In that case most were given an option to renew their expired titles by paying 35% of a ‘baseline land value’, calculated on a historic rate far lower than the prevailing market price, Guangzhou Daily has reported. >https://www.weekinchina.com/2016/04/a-nation-of-homeowners/ https://www.weekinchina.com/2016/04/a-nation-of-homeowners/ I the end, Wenzhou's leaseholders got free extension, but most likely just to shut them up. The govt did not yield to demands on relinquishing the right to set lease extension conditions. More on that in Chinese "ministry of land and resources decision, 23rd december" I myself think that government's blessing on short term leases, (edit) plus hefty property tax on regular real estate seem to be the most logical way out of China's housing bubble.
rasz 8y ago
>They’ve done well on real estate. sure https://www.youtube.com/watch?v=XopSDJq6w8E https://www.youtube.com/watch?v=XopSDJq6w8E

rb808 8y ago

Its fascinating to think about the knowledge of investors in China. How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty and communism) Combined with Chinese people all saving too much and not spending on consumption - there is a huge pool of money just floating around going into every possible asset. Its a bad combination that has to end badly sooner or later. (I've been saying this for 15 years but proved wrong every year).

stephengillie 8y ago
> How should people know how to invest sensibly if none of their parents or grand parents ever were able to own any such assets (because of poverty ...) Many study Finance for this education. At least in America, Europe, Africa, Japan, Korea, etc.
- ummonk 8y ago
  Don't know about the other regions/coutnries (I imagine it is the same), but only a miniscule fraction of Americans have studied Finance.
chibg10 8y ago
This is getting downvoted (perhaps due to the rough tone) but there's a lot of truth to it. It's part of a larger phenomenon that isn't limited to investing as well. I think a lot of inexperienced outside observers of China from developed countries tend to miss that while some parts of China now have many of the trappings of developed nations, the rapid pace with which China has evolved means that they lack a lot of the knowledge that developed countries have about how to effectively manage/use these trappings. Take driving for example. Cars are everywhere in Chinese streets these days, but most of them appeared in the last 10 years. Imagine being in a city where everyone is a new driver, and nobody's parents ever drove and thus couldn't teach them to drive. The same goes investment as well, and in many other areas. This isn't to say that there aren't a lot of smart Chinese who read stuff on the internet/learned in school/figured it out on their own (there are), but the aggregate cultural knowledge level in a lot of things people in developed countries take for granted is often noticeably more undeveloped in China. They'll no doubt grow out of it with time though (and hopefully without any significant catastrophes).

MichaelMoser123 8y ago

How did they get losses in bitcoin, given that the cryptocurrency had only been rising? Is that due to regulation?

guessthejuice 8y ago
BTC was trading at nearly $20K just a few months ago. Now it is trading at $6K. How is going from $20K to $6K "only been rising"? A lot of people are underwater when it comes to bitcoin.
- udontgetbtc 8y ago
  I mean, lets be real... bitcoin traded at 20k for about 5 minutes. The extreme spike in price was over a 2 week period. The 6k figure is roughly where bitcoin was trading in October 2017 - after a year long runup from ~$500. Anyone who bought just 10 months ago still had better returns than the stock market over the same period.
  - greenleafjacob 8y ago
    The spike in price also caused a spike in popularity...
- UlisesAC4 8y ago
  It is ok. But keep in mind that in the overall graph BTC trend is upwards. You only lost if you were actively trading on December.
  - rhino369 8y ago
    It was going up because new speculators were jumping in. And those new speculators are all underwater.

SuoDuanDao 8y ago

I remember a significant anecdote about Chinese assumptions when a Chinese-Canadian I was dating explained she always goes to busy restaurants on the assumption that a lot of customers means they have good food. The western bias is towards being the first to discover an unknown restaurant with great food that just hasn't had time to build a reputation, but that's not how a typical Chinese person would approach the restaurant problem. Abstracting that decision-making style to retail investing in a country with a bias towards savings, and the nature of Chinese equity markets makes a lot of sense.

sremani 8y ago
>> always goes to busy restaurants on the assumption that a lot of customers means they have good food. It is actually good heuristic, I would just modify it ever slightly.. lot of customers means that they will not serve "stale" or yesterday's food.
- finebalance 8y ago
  That's actually a very useful heuristic because, unlike perhaps in the US, in many parts of the world food standards even in higher quality restaurants are rather lax.
  - Larrikin 8y ago
    Even in the US I learned the hard way about eating lunch early. Chipotle is perfectly fine with serving old steak from yesterday if you're one of the first customers of the day.
    - windows_tips 8y ago
      Overnight-marinated special.
    - reaperducer 8y ago
      I was told once that Wendy's chili is made from the hamburgers that weren't sold the day before. I don't know if it's true or not, though. Even if it is, that's some fine chili for a chain fast food restaurant.