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China's Stock Crash: $3.5 Trillion Wiped Out, $2.6 Trillion Frozen
An anonymous reader writes: The stock market crisis going on in China is notable for the huge numbers involved. $3.5 trillion ($3,500,000,000,000) in value has been wiped out by falling prices, and over a thousand companies have forced a pause in trading. The combined value of all of these companies exceeds $2.6 trillion, and it represents about 40% of the total market capitalization. This follows attempts by the exchanges and the government to instill confidence in trading once more, but investors are still wary. The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental. It is hard to see how the prices as of a month ago were justified, and easy to see why the sell-off of the last month would occur. That, in turn, implies that Chinese officials are fighting an uphill battle in their policy moves to try to stop the correction, and helps explain why their policy actions have had little effect so far."
Oh it's gonna get better, there's a lot and I do mean a lot of bad debt in China. A lot of banks over the last two years have been trying to claim it, and suddenly find there's no assets to seize and in some cases assets have been used upwards of half a dozen times under different names. When it pops it's going to be massive, and exceptionally nasty.
Om, nomnomnom...
They literally have whole cities just lying around idle. I mean, Spain's got one, sure, but they have several. The economy never developed sufficiently to employ people in jobs that would permit them to live in developed cities in a capitalist society... so the places rot. If they had chosen people to just move into them by merit, or hell had a lottery, the situation would be better.
Capitalism only works when you have free markets and China is the opposite of that. When you have some businesses which clearly have state sponsorship (notably when their whole business model is lying on customs forms) the game is rigged and it doesn't work.
Here in the USA, the robber barons perverted capitalism for their own ends. In China, whatever kind of barons they have over there are preventing it from developing, for their own ends. Same problem, from different ends.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
My last two girlfriends were both born and raised in China ladies and neither understood very much about how financial markets work. The most recent was quite a bit interested in the stock market in the USA and China. The first one wasn't interested in the subject. My most recent ex-girlfriend, even though she had lived in America for a few years by the time we started dating, seemed to have this belief that you simply couldn't lose money in the stock market. On some level surely she had to know that losses were possible, but I think she just wrote those off as the exception to the rule. She would ask me questions about the market and it seemed to me that she believed that the stock market was free money for the taking, almost everybody got wildly rich, and the fact that I wasn't making tons of money off it (no thought at all was given to exactly how much I even had to invest) meant that I was stupid, lazy, or both. I can't prove it, but I suspect that a lot of Chinese people are like my most recent ex-girlfriend where they think that they can't possibly lose in the stock market. This kind of thinking explains why so much of the Chinese stock market was done on margin trading. Given the high amount of government control over the economy there I really can't explain how the people running the show believed that repeating the mistakes that led to the US market crash of 1929 would turn out differently. Maybe it's due to Chinese exceptionalism run wild (""We're China, so the rules don't apply to us because we're better than everybody else").
The think I have noticed about Chinese culture, is its [strike]competitiveness[/strike] need to win. I have seen it Chinese national students who are willing to cheat, or just get book smart so they can Ace the test, then show nearly 0 knowledge about the topic after it is done. They are more willing to go to competitions to show off. For that culture it is about being better then the others, but not about bettering yourself. This has idea has consequences, because you are not focused on making yourself better, it means you can be #1 by bringing others down too, so there is a net reductions in skill.
While Americans are criticize on the focus of short term profit, the Chinese are much worse at this.
But here is the thing. China's economy is still less then the United States Economy.
China has 10 times the population of the United States, China has the same geographical area as the United States with access to many resources. If China did things right they would be a solid #1 economy past the United States by Far!. But they are not. Because they just don't seem to have any good long term plans.
If something is so important that you feel the need to post it on the internet... It probably isn't that important.
Yeah, it'll make junk from Wal-Mart suddenly expensive. I can't say I'm upset about that.
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
The idle cities thing that Frontline reported on was massively overblown, the real estate surplus amounted to less than 7 months of internal migration, and most of the units shown were filled by the time the program aired. China has 500m rural peasants that are migrating to the cities as farms are mechanized. This will not slow down for decades.
Fortunately for China, this is a bubble that formed as the usual speculative excess on top of a building boom. Unlike our own latest market bubbles, the Chinese boom has created enough durable infrastructure - dams, power plants, rail lines, freight terminals, water systems - that the financial effect of this crisis will be muted and temporary. For years now, China has done all the building we have not been able to break ground on. China can build bullet train lines thousands of miles long, while we can't even start a research telescope.
When our current tech bubble pops, the dollar will have been backed up by...social media apps?
Posting anonymously for reasons that will be clear in a moment...
I work at a company that manufactures large items made from steel. Many companies in China, and the Chinese government itself, are customers of my employer.
Every contract we receive from China or Chinese companies has a clause that demands our company to certify that our products that will be delivered to China contain no Chinese-made steel.
I find this very interesting, indeed.