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Mina Choi Tenison

Cover Story: Chasing the Dream

Five ordinary families who have poured their hopes and savings into the Chinese stock market

We've heard the figures. The Shanghai stock market increased 300% between 2005 and the end of 2007. Total turnover on the Shanghai market grew from RMB 7.6 billion in 2004 to RMB 552 billion in 2007. Last year ended with rumors of 100,000 new accounts being opened every day. Even taking into account the January 21-22 stock market crash, the numbers are astonishing.

Nowhere else in the world has the stock market skyrocketed this much. Before the recent collapse the New York Stock Exchange was up 28% on 2005 levels. The LONDON FTSE-100 index had gone up by 10% during the same period, and the Hong Kong Hang Seng Index, despite doubling over the past two years, was in the first two weeks of January down to only 50% higher than its 2005 level.

The last time we saw growth as fantastic as we have seen in Shanghai was during the late 1990s, during the internet IPO craze. Of course, we all know what happened at the end of that craze, and the sharp falls last month hint at an uncertain year ahead. But one thing cannot be denied: the Shanghai stock market has seized the imagination of Chinese across the country. In restaurants and cafés; on television and the internet, all anyone can talk about is the big money to be made in stocks. College students and pensioners alike have been pouring their money into playing the market. And everyone has an opinion. Some say it was a bubble all along, some say to get out before the Olympics, and others say this is just the beginning.

But who are the real faces behind the statistics? How are everyday Chinese engaging with, and being affected by, stock market fever? CIB hit the streets of Shanghai to get a sampling. From the housekeeper who has doubled her investment while following her grandfather’s stock advice, to the wealthy restaurateur who had to sell his BMW to recoup his losses, these are the real faces behind all those wild numbers.

Take the Chen family. They are a veritable prototype of China’s prosperous urban middle class – that much-talked-about segment of the population that keeps the marketing departments of Fortune 500 companies working late into the night. The Chens are a young couple, both aged 30, both working full time, with a son, aged six, enrolled in kindergarten. This family of three, having started out less than 10 years ago with a monthly salary of RMB 800 (USD 110), has amassed estimated net assets of between RMB 4-5 million (USD 552,000-690,000). All in a city where the monthly average income per capita is RMB 2,465 (USD 324), as per January 2007 figures from China’s State Statistics Bureau.

But of course, these are only the success stories. As you read these words, you should notice that the people willing to be photographed and interviewed are the ones who have done well. Not depicted are the ones who have slipped between the cracks of China’s rise, or tried to invest and got burned, or who simply failed to recognize the arrival of, and the opportunities attendant with, the biggest economic growth in modern history. And then there is the January 21 “Black Monday” market crash in Hong Kong, not accounted for in this story. The specter of that crash hangs in the air, and, depending on what happens between January 24, when CIB went to print, and the moment you read these words, perhaps the happy stories profiled here have already turned sour.

The Perfect Family

"My overall plan for the 2008 Olympics is that I will slowly exit the market towards the end of the year, and move into gold and sugar commodities."

Name: The Chen Family – Chen Bin and Wang Linfeng

Age: Both are 30, with a 6-year old son

Marital Status: Married

Residency Status: From Hangzhou; currently have a Shanghai residency permit

Profession: Public servant

Estimated Annual Income: Undisclosed

Wife’s Profession and Estimated Annual Income: Middle school teacher; RMB 80,000 (USD 11,000)

When did you come to Shanghai?

My father was from Shanghai but was sent to Zhejiang during the Cultural Revolution. After I graduated from university, we received permission to return here in 1998.

Did you rent when you first returned?

Yes, in 1998 we didn’t have money to buy an apartment. My wife’s salary was only RMB 800 (USD 110). In 1999, we bought our first place, 37sqm, for RMB 110,000 (USD 15,180). Then my wife became pregnant and we also needed to take care of our parents, so in 2001 we sold the apartment and all our stocks and bought our current larger apartment. Later, some friends told us of some real estate opportunities and we bought another flat, which we later sold and made about RMB 100,000 (USD 13,800). We then bought and sold more apartments about 10 times and made between RMB 800,000 to RMB 1 million (USD 110,400 to USD 138,000).

How and when did you start investing in stocks?

When the rebates and special tax breaks for real-estate purchases ended in 2005, I sold almost all the properties and started actively investing in the stock market. I started playing stocks as early as 1996, but until 2001, the market didn’t perform. I only put in about RMB 20,000-30,000 (USD 2,760-USD 4,100). Around 2005, I thought it was a good time to put in more capital. I probably put in about RMB 2 million (USD 276,000).

What is your strategy for picking stocks?

First, I rely on my instincts. Because I had done well playing the real estate market, and managed to avoid the bear market in stocks, I was pretty confident I could play stocks correctly; I also did a lot of research into economic theories. I also rely on my friends and their opinions.I work in the government, so I receive a lot of different information. When a big coal mine accident got publicized, I started to pay attention to stocks related to coal processing technology. As the exporting of goods became more streamlined, I started tracking stocks related to the ports. I also think “green” stocks will do well. China has become the world’s production base so protecting China’s environment is protecting the world’s environment. I think this is the greatest challenge.My overall plan for the 2008 Olympics is that I will slowly exit the market towards the end of the year, and move into gold and sugar commodities.

The Driver

"I spend two hours researching stocks on the computer almost every day."

Name: Zhang Chi

Age: 41

Marital Status: Married with one daughter, age 16, enrolled in high school.

Residency Status: Shanghai residence permit

Profession: Driver

Estimated Annual Income: RMB 20,000 (USD 2,760)

Wife’s Profession: Middle manager at Shanghai Baogang Construction

Wife’s Estimated Annual Income: RMB 60,000-70,000 (USD 8,280-9,660)

Where do you live?

Baoshan District, Shanghai

Do you own or rent?

Own. Our apartment was purchased in 2002 at RMB 3,780 (USD 520) per sqm for a total of RMB 480,000 (USD 66,260); it’s now worth about RMB 10,000 (USD 1,380) per sqm, or RMB 1 million (USD 138,000) in total.

When did you start investing in the stock market?

January 2007

Initial Investment: RMB 100,000 (USD 13,800)Current Value: RMB 110,000 (USD 15,180)

When do you plan to sell?

No immediate plans. I want to hold for a long time and currently I’m not too worried about the ups and downs of the stock market.

Where do you get your stock tips and information?

From the Internet.

How much time do you spend every day researching stocks?

I spend two hours researching stocks on the computer almost every day, but my wife buys and sells on my behalf.

Stock picks: Da Gong Mei Ye; Hu Bei Yi Hua

Do you own a car?

Yes, A Buick Sai Ou. I bought it in 2004 and paid RMB 120,000 (USD 16,565) for it.

The Wealthy Restaurateur

"In the last six months, I lost about RMB 7 million (USD 966,300). . . . I can't get additional loans from the bank so I’ve had to sell my BMW."

Name: Anonymous (note: some biographical details have been changed to protect this person’s identity)

Age: 40

Marital Status: Married with one daughter, age 8

Residency: Hangzhou

Profession: Restaurateur

Estimated Annual Income: RMB 3 million (USD 414,130)

Net Worth: I prefer to keep it a secret.

How much do you have in real estate assets?

I own about 10 houses, worth approximately RMB 20 million (USD 2.8 million).

When did you start buying real estate?


When did you start investing in the stock market?


How much growth have you seen in your stock holdings since 2001?

About 300%. But in the last six months, I lost about RMB 7 million (USD 966,300) of not just my money, but my family’s money, from trading on margins. I can’t get additional loans from the bank so I’ve had to sell my BMW and have begun selling my art assets.

What is your asset growth strategy?

My assets are divided into three categories: 1) stocks, 2) property, and 3) art. My wife manages the property assets and I manage the art and stocks assets with a team of advisors who work for me, but I make all the key decisions.

What is your long-term prospect for the market?

The market still has upside potential. What we’re facing now is a short-term liquidity crunch.

Stock picks: Technology stocks

The Housekeeper

"I rely on my grandfather’s advice. He's always told me, 'To invest in the stock market, you can’t be anxious. You have to exercise temperance.'"

Name: Wang Fangmei

Age: 32

Marital Status: Married

Residency: Anhui, Wanshu – no Shanghai residency permit. Resident of Shanghai for 12 years

Profession: Housekeeper/Nanny

Estimated Annual Salary: "RMB 36,000 (USD 4,970). Five years ago it was RMB 12,000 (USD 1,660)."

Do you own or rent?

“My husband is Shanghainese – we own our own place. Our place is about to be torn down and they’ll probably give us about RMB 800,000 (USD 110,400) for it because the location is very good. My grandfather also gave us an apartment in Jiading, which cost about RMB 230,000 (USD 31,700) in 1994. It’s worth about RMB 800,000 (USD 110,400) now. We also own an old-fashioned room, about 20sqm, near the Jing An Temple area. It’s probably worth about RMB 500,000-600,000 (USD 69,000-82,800), or RMB 3,000 (USD 414) per sqm.”

When did you start investing in the stock market?

I’ve been exposed to the stock market for a long time, since my grandfather has been investing in it for many years. I watched him make and lose a lot of money. I personally started investing in 2002 with an initial investment of about RMB 5,000 (USD 690). Nothing much happened, but after the market started turning for the better, I put in an additional RMB 100,000 (USD 13,800) in May 2006.

What is that money worth now?

It’s grown about 50% and I’ve put in additional money so I have now about RMB 200,000 (USD 27,600) in stocks.

What is your investment strategy?

I rely on my grandfather’s advice. He’s always told me, ‘To invest in the stock market, you can’t be anxious. You have to exercise temperance.’ China’s economy will grow and develop. The 2008 Olympics and the 2010 Expo are big events that will bring good benefit to China’s development.”

How does you grandfather pick his stocks?He doesn’t believe the stock picks from television. He relies on his own judgment by looking at P/E ratio and the companies’ financial conditions. He has many years of experience in the stock market.

Stock picks: The chemical industry. The P/E ratio is low, only 24.

The Early Entrant

"Everybody is saying that Olympics stocks [stocks related to building the Olympics development and infrastructure] are the stocks to buy, but I will never buy them."


Name: Shang-Guan Yunda

Age: 58

Marital Status: Married with one son, age 22

Residency Status: Born in Shanghai; ancestral home is Fujian

Profession: Employee of a property management company

Estimated Annual Income: RMB 80,000 (USD 11,000)

Wife’s Profession: Primary school teacher

Wife’s Estimated Annual Income: RMB 80,000 (USD 11,000)

Do you own your apartment?

Yes, the apartment we live in, on Huaihai Road, was allocated to my father by his work-unit. We also own another apartment in Minhang [suburb of Shanghai] that we bought for about RMB 600,000 (USD 82,800), which is probably now worth about RMB 1.2 million (USD 165,700). We also own a 7sqm flat on Fuxing Road [central Shanghai] that we bought for about RMB 60,000 (USD 8,280).

When did you start investing in the stock market?

I started investing in 1992 with an initial sum of about RMB 100,000 (USD 13,800) and then I slowly increased my investment over the years.

How much money have you made on the stock market since 1992?

I’d rather not say, but our second apartment was purchased with the money we made on the stock market. We’ve also used the money to travel a bit.

How do you pick your stocks?

First, I rely on my own instincts. Secondly, I also look at the graphs and charts of each the companies, and thirdly, I follow the national current events and trends in the news. Finally, I also subscribe to Shanghai Securities News.

Which stocks have performed for you?

I tend to buy and sell short-term so it’s hard to say. I think Shenzhen’s small and mid-cap stocks are pretty good. I like LuDaDi.

How do you think the 2008 Olympics will affect the Shanghai stock market?

Everybody is saying that Olympics stocks [stocks related to building the Olympics development and infrastructure] are the stocks to buy, but I will never buy them. I plan to liquidate my stock holdings just before the Olympics and buy back in some time later.


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