Stocks can go down as well as up, reads the standard warning on invitations to invest. Many middle-class Chinese are now ruefully pondering that truth as they watch the savings they used to buy shares in recent months disappear. Massive intervention on Friday turned round the country's falling stock markets, but for how long, and at what ultimate price, remain the questions.
In ordinary households across China, the hard truth that they have lost money, often a large portion of their painfully accumulated cash , is gradually sinking in. A recovery may restore some of the lost value, but even if it does, many Chinese families will now be feeling very burned indeed. This not just a matter of a few stocks failing to pay off, but of a whole swath turning out to be seriously overvalued. Investing in their own country's economic miracle was supposed to be an act that combined civic duty with personal enrichment. In a Chinese equivalent of the western idea of a property-owning democracy, popular participation in the stock market would make Chinese workers into owners, a virtuous circle that would have big political as well as economic benefits.
Chinese leaders must also be pondering another truth, which is that when stocks fall in such a precipitate fashion, people blame the government. This is particularly the case when that government, which claims to be seeking out the "manipulators" responsible for the extreme behaviour of the markets, has itself been systematically manipulating those markets. As share values began to fall, it reduced interest rates to make holding cash less profitable, encouraged pension funds to buy more shares and took other measures to prop up the market. Even before then, the authorities had often acted as if a rising stock market was a permanent requirement for the Chinese economy, like a triumphant flag flying on top of it, tending to strip it of its necessary function of correction. All this has made things worse, inflating the bubble rather than deflating it.
It is true, as several analysts have pointed out, that the overall performance of the always volatile Chinese stock market over time has been good. Big, professionally advised investors will have done well over the years and can cope with some recent losses. But small investors, coming into the market at a late stage, are a different case. They stand to lose - indeed, already have lost - a great deal. They should have known better, say some. But that is hard when the government is actively encouraging share purchases by ordinary folk and there are rosy articles every other day about the desirability of this or that stock.
The slowdown of the Chinese economy, which is the more fundamental cause of the stock market troubles, and which began years ago, has had a serious global impact. Countries such as Australia, Chile, and Venezuela have suffered as China imports fewer of their raw materials, and the knock-on effect has touched almost every part of the world. The full measure of the damage done to world economic growth is not yet clear, and there is of course a point of view that welcomes such a slowing down. In terms of global warming, resource conservation and pollution control, there is an obvious upside. Yet the political problems are also obvious: governments of countries whose exports to China have fallen are having a hard time explaining what has happened to their disgruntled electorates.
China itself may soon have to cope with such problems. The formula that President Xi Jinping has adopted combines a strong hand abroad with rapid development at home and rising prosperity for ordinary Chinese people. Fine, if you can afford it. But the mighty Chinese economic engine, although still formidable, is not firing on all cylinders in the way it used to. That the habits of a command economy sit ill with institutions borrowed from capitalism is part of the problem. Can a stock market be set to only go up? We may soon find out.