China’s stock markets are in free fall

And investors are finding creative ways to vent their frustrations

Feb 17, 2024

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China's stock markets suffered heavy losses in 2023 and in the first weeks of 2024.

A-Shares (A股) fell more than 11 percent in 2023. Denominated in renminbi, and traded on China’s domestic stock exchanges, A-Shares are the main investment vehicle to invest in Chinese stocks.

In 2024, the Shanghai Composite Index has already fallen by 8.2%.

But this doesn’t tell the full story.

The losses made by Chinese investors in A-Shares are much greater, but are hidden by gains of a small number of large-cap blue-chip stocks, particularly the banks and petrochemical companies.

PetroChina’s share price was up by 14.7%, and large state-owned banks rose on average by 7.3% in the first six weeks of 2024.

Outside of these large state-owned companies, in January alone, the main share indices of the Chinese stock markets all fell considerably.

The CSI 1000 Index plummeted by 22.3%, the ChiNext Index fell by 18%, and the CSI 500 Index came down 16%.
In addition, the BSE 50 Index fell by 28.6%, and the Science and Technology Innovation 50 Index by 21%.
2024年年初到2月2日，中证1000指数暴跌22.3%、创业板指数暴跌18%、中证500指数暴跌16%，此外北证50指数暴跌28.6%、科创50指数暴跌21%。

These indices represent the performance of around 2,000 listed companies in China. The majority of investors in these stocks are individual investors, or “sanhu” (散户 sǎnhù).

And those sanhu are upset:

Investors are frustrated as A-shares continue to hit new lows, while major global stock indices hit historic highs.
The Dow Jones Industrial Average is nearing 39,000 points, up by over 20% in the past quarter. The STOXX 50 Index, representing European stock markets, has also hit a record high, growing 14% since November last year.
Japan's Nikkei Index is approaching 37,000 points, almost reaching the peak of the bubble in the 1990s, with cumulative growth of over 40% in the past year, making it the most attractive market globally at present.
India's Mumbai Index has also repeatedly hit historic highs, rising over 20% in the past year, nearly doubled since 2020.
让投资者郁闷的是，A股屡创新低，但是全球主要股指却都在勇创历史新高。美国的道琼斯指数逼近3万9千点，过去一个季度的涨幅超过20%；代表欧洲股市的斯托克50指数也创下历史新高，去年11月以来的涨幅达到14%；日本的日经指数逼近37000点，几乎已经回到上世纪90年代的泡沫高点，过去一年的累计涨幅超过40%，成为当前全球最具吸引力的市场；印度孟买指数也是屡创历史新高，过去一年的涨幅超过20%，如果从2020年算起，印度股市的涨幅已经接近2倍。 [1]

In the weeks leading up to the Chinese New Year holidays, panicked sanhu investors were asking:

Why is the stock market in continuous free fall, while GDP growth in China is over 5%?
Can ordinary people still share the fruits of economic development by investing in the stock market?
为什么我们的经济增速高达5%以上，股市却只能跌跌不休呢？普通民众还能够从股市分享经济发展的成果吗？

So some investors found creative ways to vent their frustrations online.

New slang terms and puns were invented to describe the malaise of China’s A-shares, like:

癌股 ái gǔ - “cancerous stocks”
- The word for “cancer” in Chinese (癌 ái) sounds similar to the “A” of A-Shares
缅A miǎn A - “scam stocks”
- A reference to an area in northern Myanmar (北缅 běimiǎn), which borders China, where many telecom fraudsters are based, who are known to target people in China. Investing in China’s A-Shares is like getting scammed.

The U.S. embassy Weibo account became a “Wailing Wall” (哭墙 kū qiáng).

The comments section on the official account under a post about a giraffe was overtaken by disgruntled A-share investors venting their anger at the markets.

In one night, the number of comments on that post surged to over 55,000, almost all of them complaints from A-share sanhu investors.

The Weibo post was titled: “Science and technology help researchers protect giraffes by enhancing awareness.” (科学技术通过提高感知度来帮助科研人员保护长颈鹿).

But there was no interest in the giraffe.

The blue mark VVIP status of the embassy Weibo feed means unsuspecting giraffe gave cover, like a form of digital diplomatic immunity, for investors to vent online and not be automatically deleted, with comments such as:

Calling on the United States to "regulate the Chinese stock market" and "save the A-share market"
呼吁美国“管管中国股市”、“救救A股”。[4]

Soon enough, the censors began to remove comments, replacing them with more cordial commentary like, “Long live US-China relations!”(中美友谊万岁), and “I love China!” (我爱中国).

The angry mob of digital protestors marched to the Weibo account of the Indian embassy, continuing their chants:

I love India. I love Indian Stock markets! I hate the cancerous A-Shares!
我爱印度，我爱印度股市，我恨癌股。

In contrast, China’s state media proclaimed that "the whole nation is suffused with an atmosphere of uplifting optimism" (整个国家都洋溢着乐观向上的氛围) in an article published on 2 February.

The effusive evaluation of the state of the nation, according to the keen eyes and ears of Geremie Barme, Editor of China Heritage, had been made by Renate Koppe, the International Secretary of the Central Committee of the German Communist Party, who was in China that week.

The positivity of the propagandists were mocked online. One creative WeChat blogger wrote a parody of the People’s Daily piece, titled:

“All of Luzhen is suffused with an atmosphere of uplifting optimism” (整个鲁镇都洋溢着乐观向上的氛围).

Luzhen is a fictional place and the setting of Lu Xun’s classic, Kong Yiji 孔乙己. Kong is a down-and-out scholar, a metaphor for the crumbling and corrupt Qing empire in its last dying days.

Kong Yiji’s home of Luzhen, like China’s stock markets today, is not a happy place.

So, why have China’s stock markets performed so badly?

The meltdown in the property market is one factor, which we have discussed before in this newsletter.

Another reason is a financial product known as “snowball derivatives" (雪球产品 xuěqiú chǎnpǐn):

Around 20 January, stories of "Snowball blow-ups" widely circulated online, raising the profile of this financial product.
The size of snowball derivatives is estimated to be over 200 billion yuan, and the stock market decline led to continuous blow-ups of these products.
If the stock market continues to fall, more Snowball products will blow up, further exacerbating selling pressure and intensifying the decline in the stock market.
1月20号左右的时候，“雪球产品爆仓”在坊间纷纷传播，“雪球”一夜之间家喻户晓，然后大家都知道了，雪球规模高达2000多亿，股市的下跌导致了雪球产品不断爆仓，如果股市进一步下跌，会有更多的雪球产品爆仓，而雪球的爆仓又会加剧卖盘，加大股市下跌力度。[5]
Note: Snowball derivatives are linked to the performance of an underlying index, offering bond-like coupons to investors as long as the index remains within a certain range. Holding these products poses high risks if the indexes to which they are linked are in free-fall.

Another caused cited in the media is that China’s stock markets are geared towards spectacular short-term IPO fund raises, and not delivering sustainable investor returns:

A healthy and rational stock market should strike a balance between fundraising for IPOs and returns to investors.
Only when investors receive good returns can they support listed companies in raising more funds, thereby forming a long-term virtuous cycle.
一个健康合理的股市应该是在上市公司融资和投资者回报之间取得平衡，只有投资者获得良好回报，才能支持上市公司募集更多资金，由此形成长期良性循环 [1]

So, will the markets recover in the Year of the Dragon, or will they continue on their downward trajectory?

That’s what we’re exploring this week!

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This week’s member podcast includes over 30 minutes of native Chinese audio.

With loads of extra phrases and insights into the language used to discuss this news story.

Favourite Five

1. 米国 mǐ guó

United States

这两天米国驻华大使馆的官微火了，大批股民冲进他的微博去留言发泄 - In these past few days, the official Weibo account of the U.S. Embassy in China went viral. A large number of stock investors flooded the comments section to vent their frustration.
Note: “Rice-country” is internet slang for the US, used on social media to avoid machine-based censors. There are plenty more like this such as those below - all politically sensitive words.
Related slang words to avoid censors:
吾国 wú guó - China
大A dà A - A-shares
郭嘉队 guō jiā duì - Chinese state-owned companies, often referred to officially as the “National Team” (国家队).

2. 和谐 hé xié

to be harmonised (be censored or removed from the internet)

有不少中国股民前往印度驻华大使馆微博留言，盛赞印度股市，同时表达了对A股的绝望，但相关言论很快遭到“和谐” - Many Chinese stock investors went to the Weibo of the Indian Embassy in China to leave comments, praising the Indian stock market and expressing despair towards China’s A-shares. However, those remarks were quickly removed. [4]

3. 割韭菜 gē jiǔ cài

harvesting leeks; taking advantage of individual investors

大A就会一直处在失血下滑的过程，也就是韭菜将无法避免常年持续被割的命运 - A-shares will continue to fall, meaning individual investors will unavoidably lose money year after year. [2]

4. 跌跌不休 diē diē bù xiū

in continuous free fall

为什么我们的经济增速高达5%以上，股市却只能跌跌不休呢 - Why is the stock market in continuous free fall, while GDP growth in China is over 5%? [1]
More: A play on words of the idiom “to talk continuously” (跌跌不休 diédié bù xiū), which sounds similar.

5. 牛短熊长 niú duǎn xióng cháng

short bull market, long bear market

A股市场多年来牛短熊长，从机制角度来看，主要还是因为A股是一个有利于企业融资，不利于投资者回报的市场 - For many years, the A-shares always have a short bull market and a long bear market. It's mainly because of the purpose of the A-share market, which is to raise money for businesses rather than give returns to investors. [1]

Consuming the Conversation

Useful Words

6. 元凶 yuán xiōng

culprit

被市场高度关注的转融通，就被很多人视为A股下跌的元凶 - The highly scrutinized refinancing has been regarded by many as the culprit behind the decline in the A-share market. [1]

7. 空头 kōng tóu

short selling, bearish position

转融通的融券功能，的确可以成为打压市场的空头力量 - The short selling function of refinancing can indeed become a bearish force to suppress the market. [1]

8. 抄底 chāo dǐ

bottom fishing

投资者面对大跌后的市场也不敢进场抄底 - Investors are hesitant to enter the market for bottom fishing in the face of a crash. [1]
More: Buying shares when they appear to be at the bottom price range.

9. 股灾 gǔ zāi

stock market crash

A股的下跌趋势如果不能尽快逆转，就有可能造成相互踩踏，形成更大的股灾 - If the downward trend of A-shares cannot be reversed soon, it may lead to panic selling of investors, turning it into a market crash. [1]

10. 发泄 fā xiè

vent, express dissatisfaction

这两天米国驻华大使馆的官微火了，大批股民冲进他的微博去留言发泄 - In these past few days, the official Weibo account of the U.S. Embassy in China went viral. A large number of stock investors flooded the comments section to vent their frustration. [2]
Related:
哭诉 kū sù - lament, pour out grievances

11. 杀跌 shā diē

aggressive selling when market falls

最近的这种杀跌的确匪夷所思，值得深入研究暴跌的原因 - The recent aggressive selling in a market crash is indeed bewildering, so it is important to understand what caused the free fall. [5]
Related:
砸盘 zá pán - aggressive selling causing a decline
爆仓 bào cāng - blow up, forced liquidation

12. 割肉 gē ròu

cutting losses

散户就倾向于不断割肉，亏钱效应就加剧了市场暴跌 - Retail investors tend to keep cutting losses, intensifying the market's downward spiral. [5]

Three-character phrases

13. 市盈率 shì yíng lǜ

price-to-earnings ratio (P/E ratio)

上海A股的静态市盈率只有11倍，深市的市盈率只有17倍 - The static price-to-earnings ratio (P/E ratio) of Shanghai A-shares is only 11, and that of Shenzhen market is only 17. [1]

14. 晴雨表 qíng yǔ biǎo

barometer

长期来看，股市是宏观经济的晴雨表 - The stock market serves as a barometer for the long-term performance of the economy. [1]

Idioms

15. 火中取栗 huǒ zhōng qǔ lì

trying to get chestnuts from the fire; impossible and futile

在这样的机制下想要获得长期回报，基本上属于火中取栗 - Trying to achieve long-term returns with such set-up is basically like trying to get chestnuts from the fire. [1]

16. 日积月累 rì jī yuè lěi

accumulate over time

大量新股上市，日积月累之后，在A股市场形成了巨额的减持力量 - With a large number of new stocks being issued over time, there is a lot of room for sell-off in the A-share market. [1]

17. 匪夷所思 fěi yí suǒ sī

beyond comprehension, unimaginable

那些在正常人眼中匪夷所思的不合理的行为和规则在他们那边可能皆是利益来源 - The behaviour and rules that seem beyond comprehension and irrational in the eyes of normal people might all be sources of profit for investors. [2]

18. 血雨腥风 xuè yǔ xīng fēng

bloody and brutal

中国股市跌得可谓是惨无人道、血雨腥风 - The fall of the Chinese stock market can be described as inhumane and bloody. [5]
Related:
血腥 xuè xīng - bloody

19. 盆满钵满 pén mǎn bō mǎn

brimming with profits

可以说融券做空在这波股市下跌中赚得盆满钵满，也成为股市加速下跌的重要原因之一 - It can be said that short sellers have profited abundantly in this wave of stock market decline, whose behaviour became a key factor for the accelerated fall in the stock market. [5]

Phrases

20. 用脚投票 yòng jiǎo tóu piào

vote with one's feet

从移民咨询率、投资意愿、工厂关停等蛛丝马迹，其实可以推算出来，不少人在用脚投票 - Immigration inquiries, investment intentions and factory closures all give a clue that many people are voting with their feet. [3]

21. 真金白银 zhēn jīn bái yín

substantial funds

真想要救市就需要超大量的真金白银砸入 - If you really want to rescue the market, you have inject an enormous amount of funds. [2]

22. 虹吸效应 hóng xī xiào yìng

syphon effect

以银行股为代表的中字头大盘股具有了避险价值，吸引了场内存量资金抱团到大盘股上，形成了资金虹吸效应 - Large-cap stocks of state-owned entities represented by banks have gained hedging value, which attracts substantial funds from within the market to invest in them, creating a syphon effect of capital. [5]

23. 北向资金 běi xiàng zī jīn

foreign capital investing in China via Hong Kong

2022年以前，北向资金持续净买入A股 - Prior to 2022, foreign capital continued to invest in A-Shares via the Hong Kong Stock Exchange.

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