What’s Happening To Chinese Stocks

Aug 23, 2021

Stock101

If you’re active in the US stock market, you should be familiar with the Chinese government’s recent crackdown on Chinese companies. For the sake of those who seen lost in the whole story, let’s take a bird-eye view of what’s happening.

Unlike the United States, China practices a Communist system of government. This means that private individuals do not have the freedoms you would expect to see if you lived in the United States all your life. China has a long-term goal for developing their country, and everything they do (spontaneous or not) plays a vital role in bringing life to that long-term goal.

This decade has seen the rise of many private companies, which are going public faster than they would have done a few decades ago because of precision and prominence. Chinese companies are not left out, as they seem to be a strong competition in every US company sector. Having a strong first-mover in Jack Ma of Alibaba is enough to give you confidence even against one of the strictest governments in the world. What happens when that confidence is shattered?

Where It All Began

Tagged as the most anticipated IPO in the year 2020, Jack Ma’s Ant group was poised to take the world by storm and seeing how Alibaba ($BABA) coped, there was nothing for investors to worry about. A few weeks before the anticipated November 5th IPO date, Jack was invited for an interview, and he spoke quite unbecoming of the Chinese government and the banking system at work in China.

That signaled the beginning of the end as Jack Ma was forced into hiding, Chinese stocks on the US stock markets were clamped down on, For-profit educational companies were ordered to offer free services or go out of business, and finally, Didi and byte group were not left out in the clampdown.

What To Expect

I won’t advise you to buy the dip. It’s unclear how far the Chinese government will go In establishing its dominance. You won’t want to be on the receiving end of the stick. Investors’ confidence in Chinese stock is at record lows, and dip buyers are/will soon reach that breaking point where they won’t be able to go on.

In the long term, the effect of a government-controlled stock exchange is not too good for investors, but even at that, some still believe that looking at the long-term goal of China’s development, these activities are temporary and worthy.

One word for now; Stay out of Chinese Stocks.

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chinese,stock,stock market