The Dangers of Chinese Stocks: A Warning

Cultural anthropologists refer to ethnocentrism as the propensity for individuals to view the world through the lens of their own culture and customs. For Americans who want to see their own inclinations towards this behavior, read the classic paper on Body Ritual Among the Nacirema by Horace Miner. Then have your kids read it to you and chuckle when they can’t figure out the punchline. For investors, this has implications that go beyond domestic bias – the favoritism investors show companies in their own country.

Spending time in emerging markets puts the risks and rewards into perspective very quickly. Risk-management products don’t sell well in a culture where risk-taking is admired and encouraged. That’s what risk-management software provider MSCI found when they tried to make inroads into the land of the panda. As the leading global index provider, MSCI is more than familiar with how China operates a bit different than the rest.

Lurking in the Shadows

Nearly one-fifth of people on this planet are Chinese. Around 800 million Chinese people have been lifted out of poverty since the 1970s. Six out of ten female billionaires are Chinese. While America’s youth talk about how you should be as lazy as possible in your place of employment – “quiet quitting” – China’s youth have a work ethic reminiscent of Americans in the 50s and 60s. What they call 996 – from 9AM to 9PM six days a week – isn’t necessarily the evil employer, it’s often ambitious young Chinese workers