Stock investors of the world unite! For the first time in modern China, you outnumber the Communists.
The nation’s $8.1 trillion equity market now has more than 90 million individual investors, according to China Securities Depository and Clearing Co. That compares with 87.8 million Communist Party members at the end of last year, the state-run Xinhua News Agency reported June 29, two days before the 94th anniversary of the party’s founding.
It’s safe to assume this is not what Mao Zedong envisioned when he led the Communists to power in 1949, and it presents tricky challenges for President Xi Jinping. A record number of Chinese citizens flocked to the stock market over the past year as the Shanghai Composite Index doubled. Now, that boom is at risk of turning into a bust after the benchmark tumbled more than 20 percent from its June 12 peak through Monday, leaving many retail investors bruised and undercutting the nation’s already sluggish economy.
“As more people get burned, the government feels more pressure,” said Ronald Wan, chief executive officer of Partners Capital International in Hong Kong. “A disorderly decline will affect stability in the Chinese economy.”
The Shanghai Composite has been on a roller coaster, taking the new class of stock novices along for the ride. It jumped 5.5 percent Tuesday after earlier falling as much as 5.1 percent in the most volatile trading since 1992 on speculation the government would take steps to stop the rout. About $1.9 trillion in market valuation evaporated over the last two weeks amid concern that a year-long rally accompanied by record borrowing and surging valuations can’t be sustained.
The Shanghai measure dropped 0.4 percent at the midday break on Wednesday.
Policy makers have urged investors to react to the fluctuations with calm while at the same time moving to appease