China’s rural dwellers embrace investing in the stock market

By Zhang Xuan Source:Global Times Published: 2015-7-13 21:08:01

Villagers watch the stock market changes at home in Nanliu village in Shaanxi Province on June 29. Photo: CFP


Liu Lianguo, a 50-year-old investor and retiree, is thinking about how he will manage his stock portfolio after losing some money over the last few weeks.

He plans to closely follow the stock market and run his small fertilizer business simultaneously.

Without any prior knowledge of the stock market, around 20 percent of Liu's fellow villagers in Nanliu village in Northwest China's Shaanxi Province have invested their savings in stocks since 2006.

Villagers like Liu have replaced their usual gossiping with discussions of major national policies, and have even given up on what was their favorite pastime, playing mahjong, so they can spend more time on their portfolios.

Media reports have revealed several other stock-crazy villages, such as one in Dongyang county, Zhejiang Province.

However, the stock market in China remains volatile after dramatically slumping on June 26.

Villagers claim that they do not borrow money to invest in stocks and just use their savings, and that they make small profits. Liu said every investor in the village has made a profit.

Despite the recent sharp falls in the nation's two major indexes, many villagers have no intention of concluding their adventures in finance and exiting the stock market because they firmly believe that it will rally and grow again.

Money in the market

Nanliu village has a population of over 4,300 who have tilled the land for generations but now many people are seeking ways to make quick profit by "going to town."

A survey published by the National Bureau of Statistics in April shows that the total number of rural people who choose to do work in sectors other than agriculture had grown to 274 million by the end of 2014, up 1.9 percent on the previous year. Many are looking for ways to occupy themselves and earn money outside of the busy harvest period.

Nanliu's residents set their wits to work by recycling hair, waste, old mobile phones and TVs, a practice which first became a common way to make some extra cash in the 1970s.

But when the first batch of villagers were introduced to the stock market in 2006, many of them started looking to supplement their income by investing, especially the male villagers aged from 35 to 60.

After witnessing the long-sluggish market rapidly rising since 2014 and some villagers allegedly making a fortune, over 100 more villagers started buying stocks.

Liu Yan, 27, the youngest investor in the village, said he entered the stock market last August, and his stock portfolio had doubled in value three weeks ago by the time the Shanghai Composite Index rose to above 5,000 points.

He has since become a full-time investor. Previously he had been following in his father's footsteps and running his own small recycling business.

When stock prices continued to rise he decided that he should invest more.

However, following the recent dip, Liu has decided he will use his money for other things.

Many villagers didn't know how to buy and sell the stock in the beginning, and they had to follow some experienced people when investing money into the market.

Wang Li, a 52-year-old female farmer, said that she lost money in her first year in the market, but she invests only a little money in stocks because she sees investing in the stock market as something closer to entertainment than to a serious money-making enterprise.

The villagers haven't made fortunes overnight or enriched their family by speculating in the stock market, although it is rumored that one villager earned 600,000 yuan ($96,660) in a month.

On the other hand, a villager who requested anonymity told the Global Times that he was too embarrassed to tell his neighbors that he had lost 200,000 yuan this year because he had invested all of his savings into the stock market before it dipped sharply.

He is afraid the other villagers will look down on him if they find out, and he plans to silently quit the stock market.

Better than mahjong

Before the villagers became investors, it was common for them to sit around a table and play mahjong and talk about trivial matters.

But now they chat about national policies such as the "One Belt and One Road" initiative or the integration of Beijing, Tianjin and Hebei Province in their spare time and fewer people are playing mahjong.

Many people believe there is a close link between stock prices and national policy.

Some villagers love to watch the fluctuations in the stock market when they have free time and they think this is a good way to improve their knowledge.

"This is learning through doing. Once you begin, you can't stop it," Wang said.

Many people think that the stock market has some rules or pattern, and Liu Jian'an, a 58-year-old investor said "stocks are better than mahjong and require a lot of knowledge."

Return to rationality

Hu Xingdou, a political science professor at the Beijing Institute of Technology, told the Global Times that many villagers have rushed into the stock market in recent years after witnessing its dramatic rise.

However, as the educational background of such people is usually at or below a middle school level, they tend to be irrational while investing in the stock market, Hu said.

People of rural or urban working class backgrounds are more likely to invest in stocks, and such people make up half of the total number of Chinese investors, according to a report published by China Business News Weekly. Investors with master's degrees amount to less than 4 percent of the total. 

There were a total of 120 million investors in the stock market in China at the end of 2014, according to Shenzhen Stock Exchange.

Li Guoxiang, a researcher at the Rural Development Institute under the Chinese Academy of Social Sciences also said people of lower educational backgrounds should learn more about investing in stocks.

"This village could be a testing ground for when the government puts forwards measures to teach ordinary people about economics and rational financing," he said.


Newspaper headline: Financial farmers


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