Classic stock mania (in China)

ARTICLE: China Leaves Small Investors Behind on Road To Capitalism, By Ariana Eunjung Cha, Washington Post, May 3, 2008; Page A01

Insecticide in China is the equivalent of jumping out of skyscrapers in NYC in the late 20s.

Classic stock mania: people get way too wrapped up in market movements and start acting like it's their ticket to paradise.

Then the crash and some can't take the adjustment.

Comments

[Louis Heberlein]

This risk taking is an embedded cultural trait in a part of the Chinese national community. Unfortunately that part of the national community gets a lot of domestic and foreign attention.

Mao observed some of that cultural trait's negative consequences in his youth. He saw it as a vulnerability to nasty foreign exploitation.

That was a key reason that he not only sought state control, but national isolation from potential corrupters.

The real trick for China will be to exploit and evolve that trait while minimizing its down side risk.

There are Chinese entrepreneurial risk takers all over Asia, and in many cases their families were active there during the Cold War. Then they provided seed money to modernization efforts in both mainland China and Taiwan.

Our academics study the old Cheng Ho maritime political venture, but ignore the 'boring' story of decades of Chinese maritime trading ventures that preceded him.

Note that entrepreneurial and investment risk taking have been part of the South Korean culture in recent decades.

Japan tried to control public investment options though a managed national capitalism. There were still risk takers that sought safe real estate investments abroad and learned that that could also be an illusion.

So Chinese risk taking experiences should be viewed as part of a learning experience rather than a stigma.