Avoid losing a fortune by following the Party’s lead
Published: Jun 25, 2015 06:28 PM

When my friend Joan called me yesterday to admit that she had made a bad investment, I murmured to myself "it serves you right."

The story starts in 2013, when she first mentioned that her family was considering investing in the high-end furniture industry. A "trustworthy" friend of theirs in Ningbo, Zhejiang Province had been bragging about having "all the right channels" in this lucrative business. Because Joan and her family were "such good friends" of his, he would let them become shareholders - with an investment of just 1 million yuan ($161,100).

After consulting with me, I advised against it with a firm "no." As a journalist, I was aware that the new Party leadership had vowed to take a hard stand against lavish government spending. Local officials were strongly advised to become more frugal in their expenditures, something that heretofore had been lacking in the leadership.

Joan's contact in the rosewood furniture sector was obviously ignorant of the new anti-corruption campaign targeting both tigers and flies (top leaders and low-level bureaucrats) and was speculating that they could sell luxury furnishings to businessmen, who in turn would use the items as gifts to bribe officials in order to get their profitable projects approved. My journalistic instincts told me that the days of dishonesty were coming to an end.

Nevertheless, the promise of fortune was just too tempting for Joan and her husband, who ultimately chose to trust their sweet-talking friend. "It's your money," I sighed. Two years later, Joan rang me with an update. Their partner was unable to sell his rosewood furniture, just as I predicted, and following some disputes between them, she wanted out.

The problem, however, was that their so-called friend no longer had the 1 million yuan in cash they had entrusted him with. The only compromise they could come to was to give Joan a million yuan worth of rosewood furniture. "Do you have any friends who are interested in luxury home furnishings?" she asked me meekly.

Her call came exactly at the same time that the Chinese stock market was taking a nose dive after months of rallying. The economy in general was also becoming sluggish. With everyone's liquidity locked up, I couldn't think of any ways to help bail her out.

"As long as you don't need the cash any time soon, maybe you can rent a big storage locker for all that furniture and turn it into a long-term investment," I joked. My humor was not appreciated.

Joan's story is a perfect lesson in not "following the Party's footprints," a relatively new adage meaning that anyone who dares go against national policy is doomed to suffer economic losses.

China's economic trends can be predicted simply by paying attention to the directives coming out of the central government. For instance, after years of lending for the purpose of real-estate investing, many companies and individuals were neck-deep in debt. To help them re-capitalize, around this time last year the leadership started issuing suggestions about stock market investing. Borrowing money on margin became easier and a record-breaking rally ensued.

Anyone reading People's Daily or watching CCTV's Xinwen Lianbo, a program for the State to announce economic and policy directives to the public, would have gotten in early and made a tidy sum. But the problem is that most people don't pay attention to the news anymore. The average person is more inclined to listen to social media "get rich quick" rumors, or the whisperings of acquaintances who claim to have insider information or guanxi (special relationships) with officials.

For so long our society operated on shortcuts, so now that is all anyone is seeking anymore. Few are interested in honest business dealings or making long-term investments in legitimate enterprises.

Even though my profession requires me to keep my ear to the ground, I have never had the intention of profiting from it. Do I regret not investing in the high-speed railway construction back when it was just a nascent concept? Should I have sunk some cash into infrastructure projects in certain countries that I knew would benefit from high-profile visits by our presidents and premiers? Maybe. But mostly I am satisfied with being rich in the knowledge that hard work and intelligence are the only sure investments in life.