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While Brits are enjoying a bank holiday, Chinese reporters have been getting arrested for causing investor anxiety by reporting “great losses” as, well, “great losses.” Yet, today, Monday, 31 August, the Shanghai Composite Index closed the month down 12.5%. It was the third month in a row that the index has fallen. In fact, August was the worst month for Asian markets in three years.
According to the Wall Street Journal, “A reporter for Caijing, Wang Xiaolu, was shown on government-run China Central Television on Monday saying he wrote an article in July that had a “great negative impact on the market.”
The WSJ story went on to say that, “China’s Ministry of Public Security said 197 people are being punished for what they called spreading rumors about stocks and other incidents, including comments online about deadly explosions in the northern port city Tianjin in August. Such rumors “deliberately confuse people, create a panic, mislead the public, seriously disrupt the financial market order and social order.””
Mr. Wang said, “I shouldn’t have released a report with a major negative impact on the market at such a sensitive time. I shouldn’t do that just to catch attention which has caused the country and its investors such a big loss. I regret . . . [it and am] willing to confess my crime.”
Nonetheless, the Chinese government has reported that it will discontinue making large stock purchase to prop up the market. Government owned institutions have reported purchased some $200 billion in Chinese stocks during the past two months.
From my perspective, the issue at hand is accurate reporting. That is, that accurate reporting is not allowed in China if it makes the Chinese government look bad.
I realize that I am standing at the top of a slippery slope here, but if China is going to play such a big role in the world economy, shouldn’t reporting the truth and shouldn’t reporting speculation have a rightful place?
Or, perhaps the rest of us are wrong. Perhaps we should not speculate about “what might happen if.” Perhaps we should not report about share price and index declines. Perhaps we should only report what makes people feel good. Perhaps we should keep the public unaware of what is really happening. That might for a few dictators who want to stave off a potential revolt, but “at the length, the truth will out.” (Wm. Shakespeare, Merchant of Venice, Act II, Scene 2)
It’s been a long time since something was rotten in Denmark (Wm. Shakespeare, Hamlet, Act I, Scene 4). The scene has shifted to China. Slowly, but surely, the world is beginning to realize that the government-support economic boom in China is beginning to deteriorate as though natural forces are prevailing to expose it.
The economic boom has created an abundance of ultra-high net worth individuals (UHNWI) in China, but even many of them are trying to find a way to protect their personal wealth as the government seeks to limit their activities.
My point is that investors need to take care when considering investing in Chinese-based companies or portfolios with an abundance of investment in Chinese operations. We are seeing evidence that we have reached a tipping point at which, if the Chinese economy becomes more volatile, the whole world will suffer the consequences.
In the meantime, I have to agree with Secretary General of Reporters Without Borders, Christophe Deloire, that “Suggesting that a business journalist was responsible for the spectacular fall in share prices is a denial of reality. Blaming the stock market crisis on a lone reporter is beyond absurd.”
Nice article whilst your footnote paragraph equally nicely denies you have anything at all to do with it. Except publish it of course!
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