DiligenceChina

The only thing more reliable than the steady rise of the domestic Chinese stock market is the steady stream of writers warning of it’s eventual crash. Who are we to buck that trend?

One of the many advantages of having an iPod in China is that one gets to listen to a rather well-known British news program that is otherwise unavailable over here. They recently did a fascinating story on the OTHER kind of financial speculation in China. No, not real estate. No, not license plates. Ok, I’ll just tell you – in burial sites. Apparently the price of gravesites has outpaced the price of luxury condos – so naturally there arose a series of get-rich-quick schemes targeting small-time investors. According to the news report, a local company which alleged to have been the owner of a cemetery – advertised that, “All you have to do is buy some empty graves, wait a while until the price rises, and then make a safe and easy profit”. Well, of course the plan ended in tears or it wouldn’t have been on radio – or in this site.

One Beijing grandfather spent his family’s entire life savings on 24 empty plots, but the company never delivered and he now has no recourse. The story went on to fill us in on all the details that we’ve grown used to… hundreds of poor, hardworking folk bankrupted in the swindle, never saw it coming, no compensation. What’s interesting, though, is their reaction – and that of the government’s.

The investors – all too willing to exploit the sorrow and misery of their bereft and desperate peers – were uniformly shocked that they were cheated. “I will never forgive them.” “They have cheated me so badly.” “You should not treat us ordinary people this way.” “We’ve been petitioning the government and trying to get our money back for 6 years, but we can’t”. They seemed genuinely shocked that they were cheated in a scheme that should have sounded a bit dodgy from the very start. AND THEY IMMEDIATELY LOOKED TO THE GOVERNMENT FOR REDRESS.

The government response? Nothing for these poor sods, but they did pass a regulation prohibiting speculation on gravesites. Nowadays, you apparently have to be able to demonstrate that you have a use for the plot before you can buy one.

This was an investment scam that affected HUNDREDS of people. Can you imagine the kind of chaos that we’ll have in the event that the A share markets take a tumble?

And then this was in today’s Shanghai Daily

Most investors have no clue how market works: AN overwhelming percentage of investors trying to cash in on the country’s bullish stock markets have little to no clue about how the market works, a recent survey suggests.

The indications coming from Beijing are that they won’t take any direct action to control the market, though their steady stream of prudent jawboning and rate-hikes has been widely ignored. It seems that there is only be one way for this situation to resolve itself — and it will probably entail a lot more interviews from a lot more bankrupt grandfathers.