25 October 2016
Lamborghini Guangzhou is still doing a roaring trade. Photo: lamborghini-vietnam-blogspot-com
Lamborghini Guangzhou is still doing a roaring trade. Photo: lamborghini-vietnam-blogspot-com

Guangzhou shrugs off stock market crash

On a basement floor of Taikuhui, one of Guangzhou’s most upmarket shopping malls, customers are admiring five Lamborghini sports cars, each available for a cool 8 million yuan (US$1.26 million).

“I have seen these on the streets of Guangzhou,” said Wang Jian, a schoolteacher.

“These will be sold too. They are the kind of car the children of the rich like to buy.

“We have many wealthy people here.”

Like elsewhere, the capital of Guangdong, China’s richest province and the one with the largest number of millionaires, was hit by the stock market crash.

“I heard the average family lost over 300,000 yuan and believe it,” said Liang Ying-ming, a salesman.

“Rich people took their profits, and new retail investors came in and got burnt.

“Some young people who borrowed and lost money they could never repay jumped to their deaths.

“That way, they and their family do not have to repay the debt.”

But the city has absorbed the losses and remained on course.

The latest figures from the government show an economy in good health.

In the first half of this year, Guangzhou’s gross domestic product grew 8.1 per cent from a year earlier to 8.29 billion yuan. The service sector’s output rose 8.9 per cent.

There were 25.3 million visitors, up 6.8 per cent. They spent 117.85 billion yuan, up 11.7 per cent.

Retail spending in the period was 380 billion yuan, up 11.2 per cent, and exports rose 29.8 per cent to 234.5 billion yuan.

This strength comes from diversity.

Guangzhou is a major manufacturing and industrial centre; it is the administrative capital of China’s richest province, with the most foreign investment; it is also a trading mecca, with tens of thousands of long-term residents from Africa and the Middle East who buy Chinese goods for export to their countries.

“Unlike in foreign countries, the stock market in China has no relation to the real economy,” said Han Li-ming, who works in a high-tech company.

“It is for speculation and gambling.

“If a company stock price is high, that does not mean it is a good firm, nor the reverse.

“Look around you — Guangzhou is booming.

“It is a center of tourism and high consumption. These have offset the losses in the stock market.

“Exports are weakening, which hits a place like Dongguan badly.

“But the economy here is broader and can compensate.” 

In fact, Huang Jun, a taxi driver, said: “The problem here is too much wealth.

“There are traffic jams throughout the day because so many people buy private cars that clog up the road.

“Our problem is not a shortage of customers but illegal and Uber taxis that steal them from us.

“The Hong Kong government took action against them, but ours has not, even though what they are doing is illegal.

“I do not mind competition, but it must be on an equal basis, as the Americans like to say.”

For the time being, the public has lost confidence in the stock market, so no one will invest in it for the rest of this year.

The enormous funds held by Guangzhou people will move offshore and into the property market.

A survey published last week by Industrial Bank and Boston Consulting Group of 1,200 people in 18 provinces with more than 6 million yuan each in net assets found the largest number were in Guangdong.

Stocks were the favourite investment of 65 per cent of them.

Over 40 per cent have invested abroad in wealth management and private assets, with Hong Kong the most popular destination, followed by the United States and Canada.

They like Hong Kong as one of the most important offshore private banking centers in Asia; it is an offshore renminbi center and better than other places near China in terms of tax and specialist personnel, they said.

Hong Kong is a market where stock prices are related to the performance of a company, so they are easier to track.

In the mainland, most important is to try to anticipate the behaviour of the central bank and other government institutions — a very inexact science.

The property market will also benefit from the stock market crash, especially after the recent reduction in interest rates by the central bank.

The cut has brought down the interest on a mortage from 5.4 per cent to 5.15 per cent.

Pages of the Guangzhou newspapers are filled with detailed reports and analysis of the property market all over the city.

There is a television channel devoted entirely to property.

New skyscrapers are going up in Zhujiang New City, the most expensive district of Guangzhou, where new apartments sell for up to 80,000 yuan per square metre.

The city is already starting to train the next generation of investors.

Next month, students at 36 primary and secondary schools will take classes in financial management.

This is a pilot program, the first of its kind in China, approved by the Guangdong Department of Education.

“Investment, financial management and trading shares are part of the family now,” said Pan Xuzhao, the secondary school teacher who helped to prepare the textbook to be used in the program.

“It is better that children be taught this in a classroom than it be forced on them by an overworked mother who does not understand what she is investing in.”

Guangzhou’s next generation of millionaires has entered the incubation period.

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Hong Kong-based journalist and author. He had worked as a correspondent for the South China Morning Post in Beijing and Shanghai.

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