The Chinese government has frozen the buying and selling of stocks after the Chinese market took a hard dive. The fortunes of executives and major shareholders remain stable, but average Chinese citizens have suffered massive losses. The Chinese government encourages its citizens to invest in the stock market.
The Chinese government froze $3 trillion worth of stock to prevent its sliding market from completely flatlining. Although government action prevented a major meltdown, small time investors took the brunt of the losses. “I would call this a major stock market catastrophe,” Zhang Guoqiang told CBS News. “We have never seen anything like this.”
Average citizens visit stock trading halls that CBS described as resembling “dingy gambling parlor[s].” Over 90 million people in China invest in the stock market, 80 percent of which are average citizens. That’s over 70 million who have lost almost all of their money. One small time investor said he lost up to 70 percent of his savings.
“That is real money,” said retired manager Peng Lixin. “Those are real fortunes being lost in there . . . within one month the situation came to us.”
Average Chinese citizens invest much their money at the encouragement and insistence of the government. That encouragement created in citizens a misplaced faith in the stock market as millions of people often invest their own life savings. “The government can try to order investors to stop trading,” said Gillian Tett of the Financial Times. “But it can’t order people to start believing in the future or get confidence back in the markets again.”
China and America are somewhat similar because the power of each is concentrated among the few. China is just more extreme with its power concentration. When power is placed in the hands of an elite few, this is the result.