China's Fine, but Beware the Stocks

By numbers at least, individual Chinese investors. About 82 million Chinese now have stock trading accounts -- that's about 1 out of every 20 Chinese -- and the numbers of individual traders have been growing at an ever-accelerating rate.

Last year, 2.4 million investors opened new accounts and began trading on the Shanghai stock exchange. In January, 1.3 million Chinese opened new accounts. This influx of new domestic investors -- and new domestic money -- has been key to pushing domestic stock prices higher and higher.

Higher, even, than the share prices of the very same companies on more-international markets such as the Hong Kong exchange. In early February, out of the 37 Chinese companies listed on both the Shanghai and Hong Kong stock exchanges, eight traded in Shanghai at twice the valuation that they had on the Hong Kong exchange, according to a recent study by JPMorgan Chase.

Just Like Capitalism

That's because the true big dog on the Shanghai and Shenzhen stock markets, the Chinese government, has acted to restrict the supply of shares on the domestic stock markets. The Chinese government still owns majority positions in most of the companies that trade on these exchanges. Some figures say the government owns about two-thirds of all the shares of companies that trade on the domestic stock market.