The Shanghai Stock Exchange composite index fell below 2,000 points on November 27, 2012, the lowest since 2009. According to a poll, 92% shareholders have lost money [zh] in their investment. A recent survey in Sina showed that more than 25% suffered from 50-80% loss and 24.2% suffered from 30-50% loss. Within 7 months, Shanghai and Shenzhen Stock Market has vaporized RMB 4300 billions (approximately USD 700 billions), only 3.35% shareholder accounts are still active in the exchange market. On average each shareholder has lost RMB 76,800 yuan (USD 12,000).
As China's economy has been growing, its stock keeps sinking. Why is that so? Many shareholders blame corruption. Below are some discussions in China's micro-blog [zh]:
Xiao Zhijun: In the past ten years, the stock market and our country's GDP have been moving in opposite directions. The stock market keeps sinking and shareholders are desperate. The country's income has grown, the shareholders have lost their investment. People's livelihood is difficult, there is nothing to be proud of.
Corruption and fraud in the market
2012 is very crazy: This is a place where the extreme minority of people rob the majority by making use of regulations. The corruption and decadence is much worse that the China football sector before reform.
Nanimina: The China stock market is not investment market but gambling market. It is like putting thousands of dollars onto the gamble table. The big fraud works with a bunch of deceivers cheating the Chinese shareholders’ money. Wake up!
savage: They repackage the corporation for the market, control the flow and push up their listing price to steal money and create new billionaires. One year after another, they fabricate stories and account details, cheat government's subsidies. Then they issue more shares and extract money from the market, cheat the shareholders again. They do not share profits by giving out dividends. After a few years, they cash out their shares and migrate out of the country, leaving the corporation behind. Even outsiders see such tricks, but nothing has been done to stop this. There is embedded interest in the fraud while ordinary people are doomed to be cheated.
Lao Xu: The Shanghai and Shenzhen Stock market sinks to the lowest today. Common sense tells us that the stock market reflects the market and we should not blame the government for its behavior. But I have to ask: Who gave the instruction in the party [Chinese Communist Party] political report that the proportion of people's property income should grow? Who persuaded shareholders to stick to value investment? Who told people to have confidence in the listed companies? Chinese shareholders are the most innocent kind, they follow the advice and now have lost their underpants. Who should be responsible for their misery?
A single paragraph: The stock market has robbed and harmed 130 million shareholders. I am quite sure that they have experienced Chinese corruption through the stock market. No matter how flowery your speech is, they will judge by their own experience.
Calls for finance regulation reform
Although more than 60% of shareholders hope that the government can intervene and save the market, many professional commentators think otherwise. For example economist Hua Sheng believes [zh] the only solution to the current situation is finance regulation reform:
Some reporters asked me about the stock market at the annual finance conference. I explained that the main reason for the sinking stock market is that the current supply is much bigger than the demand. Hence, reform is the best measure to save the market. [The China Securities Regulatory Commission] should impose stricter requirements for corporate entry to the market so as to kick the wolves out of the queue. At the same time, impose restrictions for major shareholders cashing out their stock when the stock price is much lower than the initial listed price. [The authority] should also investigate fraud, make sure that the sponsor institution which gave recommendations and guarantees to the listed corporation have liability for the fraud. If such reform is put into practice, the stock market will stop sinking and rise again.