... moving in anything other than baby steps could unleash a storm of social unrest in China. The kind of wealth created by the stock-market boom is pretty much all that legitimizes Communist Party rule these days. The social contract in China now runs along these lines: Give us rising incomes, more things like those people have in the developed economies and a reasonable degree of stability, and we'll let you run the country. If the Communist Party can't deliver its part of the bargain, however, no one knows how much force it would have to apply to ensure its continued hold on power.
"I knew the market would go down, but I did not expect it would be this fast. After a small plunge, it should go up, but it is not going up," said Madame Wang, a pensioner in her 50s, who put some of her savings into stocks during the bull run.
"Next time I will remember -- once the market falls, I will sell all my stocks."
Another disillusioned investor at an Everbright Securities branch in Shanghai's financial district, a woman in her 30s surnamed Xu, said:
"I used to have confidence in the stock market. But how can I have confidence now that it has fallen so much. I have no more confidence. Even if the government wants to regulate the stock market, it should not be done like this."
In the end of the day, China is a Communist country. Personal wealth does not officially exist. Anything anyone "owns" is with the permission of the Communist Party, which can take it back anytime it wishes.
Essentially, these people are playing the stock market with money they dont really own, in the sense that we in the west own things. Anyone in China who appears to have wealth, has it because they are in favour with the local communist party.
Problem for China, is that eventually it will all come crumbling down. The people will want to really keep the wealth they have earned. As appetite for consumer western style goods grows, they'll want the whole package - the western lifestyle - which includes democracy. They'll want more freedom to chose, more freedom to acquire wealth, a more equal society where merit rather than communist party membership gets you on in the world.
China is also very diverse with different peoples in different parts. When it crashes, and the people want freedom, expect it to fraction into various independent countries ala the soviet bloc.
May I ask you, does anyone have ideas on why the bubble originated in the first place? Some change in private ownership laws or something?
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