China Stock Market Misses Out on Boom
SHANGHAI — It's been four years since Zhou Xiao and her husband, textile workers in their late 40s, put their family's savings of about $36,000 into China's stock market.
The couple had hoped to make enough money to buy a house. Instead, they lost half their investment and still live with relatives, while Shanghai's home prices have soared.
"We're trapped," said Zhou, sitting in a securities trading hall in this city's French Concession area, her eyes fixed on an electronic tote board.
Millions of Chinese have learned hard lessons about the risks of playing the market. China's national stock index sank 15% last year, making it the worst performer of the world's major markets. The index is down more than 40% from its peak in 2001.
The losses might be a little easier to swallow if China's economy wasn't doing so well. Last year, the nation's economic output surged 9.5%, the fastest pace of all large economies and more than double the U.S. growth rate.
China's struggling stock market, analysts say, threatens the nation's financial and social stability. Leaders meeting this week in Beijing for the annual National People's Congress will consider proposals to address the ailing market.
The problem reflects an underbelly of China's booming economy. Although price declines are in part a correction of heady values in prior years, many experts say insider trading, fraud and a lack of financial disclosure are undermining investor confidence.
Another big drag is the market's ownership structure. Two-thirds of the shares, measured by value, belong to the central government and are not tradable. Beijing wants to unload its holdings onto the market, in large part to reform corporate governance practices, but the move could further depress prices.
"This is a totally debilitating situation," said Donald Straszheim, a Los Angeles-based economist specializing in China.
It's unclear what action, if any, Chinese legislators will take to fix this problem. The state has taken several steps in recent months to bolster confidence, such as reducing trading taxes and promising to set up a fund to protect investors in bankrupt brokerages.
But most of the more than 300 proposals being considered by the congress have nothing to do with the market problem. Among dozens of economic matters to be considered, analysts agree that the top priorities remain clamping down on corruption, narrowing the nation's wide income gap and reducing regional economic disparities.
