Monday, March 19, 2007

More Investment education, or more trust to the government?

I've been reading an investor education book published by People's Bank of China, the nation's central bank. It is like a finance knowledge ABC book, not very hard but a bit interesting. I brought it from Beijing to Hong Kong, and read it just for leisure. The book's purpose is to let the common people understand the financial market better.

I remember both Premier Wen Jiabao and central bank governor Zhou Xiaochuan said publicly that they hope investors, especiall retail investors, could be much more educated. They should understand the risks in the capital market and be cautious in putting money in.

Speaking of this, I remember when I talked to a Beijing friend who is a fun in buying stocks and funs. If he, or his wife, or his parents, has some extra money, he will be more than happy to buy stocks, or funds, or even properties. He told me: "trust the government, it is more powerful than you could imagine."

If investors all act like him, why they would be bother to be educated????


Mr A.K. said...

As a matter of fact, this is exactly why they are required to be educated.
For instance, there was once an old lady who intended to buy some
fund shares about which she had almost no knowledge. Been told the demand overwhilmed the provision, she lined up at the bank almost 48 hours before the debut of the launch. Even though, when she finally had the chance to step to the counter, the staff told her that all the fund had been sold out.
Guess what she did consquently? She called 110 (like 911 in the US), holding the bank or even the authority responsible for this result.
From here we can imagine how terrible it could be if the lady got some share but unfortunately lost money.
I've actually heard some story more violant. Blocking the road, as they usually do. Smashing the counters, sometimes.
Just like your friend, many Chinese investors( or the de facto desperate speculators) usually count on the government as the insurance for their speculation.
This is kind of sequela resulted from the planned-economy in which the government offers cradle-to-grave life support.
Of course, the chinese government always puffs its accountability amongst its people. But, as any other rational regulators, it won risk itsself for those reckless invest behaviors.
Its purpose here in the finance market is to raise money and bolster its development plan, but not causing more discontentment.
It is wise enough to take pre-emptive action--the pre-market education- to exempt itself. it is thus just like the disclaimer you read from the internet service provider.

Amy or koala said...

A.K., you definitely gave an insight