Policy risk is among the highest risks for any investment in China, as China is famous for unexpected and sudden change in its policy
There are a lot of well written articles recently about ‘Chinese market bubbles’, however, I’ve not seen too much coverage about this very fundamental but important factor.
I understand that there is nothing more important than ‘Face’ in our culture. ‘Face’ (面子in Chinese) has the meaning of pride and dignity.
Here I’m not only talking about the ‘Face’ of the Chinese leaders (which is itself important), but also to the ‘Face’ of the country which will affect the sustainability of the Chinese economic growth.
‘Face’ is especially important for
I want to show you some examples of what our country is doing, down to very detail behaviour, to support my rationale:
- The Chinese government has recently provided training to the customs officers and asked them to be friendlier to visitors with smile on their faces. If you have visited
previously, you probably noticed that those officers were very cold. China
- The government has also taken actions to standardize the proper English translation of restaurant menu. (Previously those translations were so bad that you have no clue what they really mean. Look at "stewed bean crud”; "badly cooked starch cubes” or “fish in first position")
Why is the Government doing all these? To prepare our country for the grand reception of huge number of global visitors coming to
How does ‘Face’ factor relate to the debatable bubble? My view is that for sure the Government will try to manage the over-heated market by different means, such as open statements from senior government officials about their view of the market; leveraging high profile expert’s opinion [See Jim Rogers’ opinion here], and introduction of new policy.[China has banned the usage of re-finance mortgage to invest in stock market]
If you are short term (in terms of weeks) speculator, this may not be a good moment for you to play the Chinese game. If you are looking longer horizon of 2-5 years, I still believe
I still have a long position in CAF (see here for our blog's recommendation), and I will maintain my position at least untill the Olympics party is over.