COLD WINDS BLEW into Hong Kong as November turned into December, 1990, but there was hot news among a group of journalists at the South China Morning Post.
We were discussing the stock exchange that had been unexpectedly opened on 1 December in Shenzhen, the fishing village that ran just over the border that separated us, in imperial British colony of Hong Kong, from Communist China.
The Shenzhen organizers had opened it early to steal a march on their friendly-ish rivals in Shanghai, who were preparing to open one later the same month.
These moves ran contrary to what was being reported about the country, which was supposedly under the hardening iron grip of communist hardliners. But we in Hong Kong had long known that that was the norm: the Chinese never followed the script provided for them by outsiders.
Before opening their stock market, Shenzhen residents had flown to Japan to work as interns at the stock exchange in Tokyo to learn about share markets, as this cutting from a Japanese newspaper shows.
ONE SMALL ROOM
Shenzhen’s stock exchange opened on December 1 with a few people in red jackets in a smallish room (picture below), and Shanghai’s on December 19. Each had just a handful of companies listed.
This writer and his colleagues started a new column in the South China Morning Post’s business section. News varied from interesting to boring.
A warehouse attendant from Shanghai bought 500 shares of an electrical vacuum company, paying 365 rmb for them. But the shares closed the same day at 384rmb. In a few hours, he made more than his annual salary at the warehouse.
I remember one day when no shares were bought, sold, or exchanged on the Shenzhen stock market. Try to write a 25 centimeter newspaper column on that!
The Shenzhen stock market’s trading floor was small. Inset: the organizers rang a bell to mark the beginning of trading on the first day.
But let’s get back to the warehouse guy who DID make some cash.
The man’s name was Yang Huaiding. He was a chainsmoker, buying the cheap Double Happiness brand, as his income was just 41 rmb a month. The 39-year-old, who lived in a one-bedroom apartment with his wife and child, had learned the magic of share trading two years earlier.
And when we say “share trading” we mean taking a train, actually buying a piece of paper from one place, taking another train, and selling it in another place. His favored certificates were Chinese government bonds.
This had not been done before – but Yang remembered the ancient legend known as “the first person to eat a crab”.
About four millennia ago, crabs invaded rice paddies, and they frightened the people, being hard to kill. The story goes that one man threw one into a pot of boiling water, noted the delicious smell coming from it, and ate it. The rest was history, as they say.
Crabs by Dong Changqing , a Hebei artist
So crab-man Yang started taking trains between various cities – on his first deal he made 800 rmb profit, almost two years’ salary, for one day’s work.
He spent some of the cash on foreign brand cigarettes, which he handed around to his workmates at the warehouse, and causing his bosses to wonder if he had stolen the cash.
FAN OF THE GOVERNMENT
Yang repeated the arbitrage trick, and other people joined him, eventually attracting the attention of the authorities.
But Yang was no enemy of the government, but a fan – as a student, he had been a Red Guard.
One morning he marched into the Shanghai tax department to ask if his investment income made him liable to pay tax.
“Actually, no,” staff said.
“Fine,” said Yang. And carried on.
Yang soon become famous. The new “first man to eat a crab” became a multi-millionaire and a symbol of the new China: a capitalist-socialist blend in which the mixed advantages of having an unfettered press were happily sacrificed for the ability to manage the economy in a way that would create opportunities to lift people out of poverty, whether you were a rural farmworker or a warehouse attendant.
Making that choice was simply incomprehensible to Western foreign correspondents, and remains so today.
Yang, of course, gave up the job in the warehouse and become a full time share trader.
He became known for his aphorisms:
“When the front of the stock exchange is crowded with bicycles, sell.”
“The only real money is the money in your pocket.”
“Learn from those who have the courage to eat crab.”
Yang died on June 13th, at the age of 70 or 71 (nobody seems very sure), and is missed by both socialists and capitalists—having been the living symbol that both elements can and should work together.
Shenzhen stock exchange today: Picture by KLcmstarz/ Wikimedia
BIGGER THAN THE UK
Today, the stock exchanges in Shenzhen and Shanghai have overtaken most of the world’s markets.
The London Stock Exchange has a capitalization of about US$5.4 trillion. In comparison, the Shenzhen share market alone is worth about US$5.72 trillion.
Pretty good for a market in which one day’s turnover, just 30 years ago, was zero shares sold, zero shares bought, and zero shares exchanged.
Something to think about: The US stock market is the largest in the world, but took more than 200 years to grow to that point, having started in 1792. The Chinese stock market is in second place after just 30 years.
Consider what that means for the future.
Perhaps more of us should “Learn from those who have the courage to eat crab.”
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Main pic by Rompalli Harish/ Pexels; Other pictures from historical sources unless noted