Chapter 353 The Arrogance of Intellectuals (Bug Fix): Not an Investment
The people who went to the Shanghai Stock Exchange to watch the excitement hadn't returned yet, but the curiosity of the customers in the buffet restaurant had already swelled to the point that they couldn't wait any longer.
Someone pulled out their mobile phone and called an acquaintance: "Hey! Are you there? How's it going?... It's really canceled? Isn't it a good thing it's canceled? Weren't you fucking bullish all along?"
Then the person on the other end of the phone said something that made the guy on the other end burst into laughter.
The people around him craned their necks, looking like ostriches in a zoo. Only after he finally finished his call did they eagerly ask, "What happened? What happened?"
The customer holding the mobile phone laughed loudly: "Weren't all the trades related to 327 void in the last eight minutes yesterday? This guy was shorting 337 and 319 and going long on 327. Now his long profits are gone, but he has to accept his short losses. If he had been any quicker, this wouldn't have happened."
The others joined in the laughter.
They don't trade government bond futures; they trade traditional stocks. Yesterday's stock market was a stellar run, with Zhongshan Fire & Water Group surging 87%, and other stocks each showing their own unique performance.
Those who have made money are more interested in watching others' misfortunes. One person who had previously called a friend on a mobile phone commented, "If you ask me, all the transactions from yesterday should have been canceled if it were to be cancelled."
Opening positions by borrowing trading seats is perfectly normal in the Shanghai Stock Exchange's futures market. The fact that the Shanghai Stock Exchange cancelled the last eight minutes of trading on March 27th for this is a bit of an exaggeration.
The others, eager for a good laugh, joined in the commotion: "Yes, yes, yesterday doesn't count, let's start again today."
Someone else laughed: "Not today, all treasury bond futures trading has been suspended this morning."
Amidst the laughter and cheers, a voice suddenly rang out: "It's no use starting over. The Ministry of Finance raising the coupon rate is something that should never happen anywhere else in the world. The 9.5% interest rate set three years ago is the contract! Raising it any further would violate the most basic spirit of a contract!"
In order to protect its own cronies, the Ministry of Finance, a powerful institution, has trampled on even the most basic market rules and economic principles!
Wang Xiao looked at Zhou Liang, who was once again filled with righteous indignation, and rubbed his fingers on the glass, repeating with a playful tone, "The spirit of contract?"
Zhou Liang, his passion reignited, was instantly doused with a bucket of snow water.
Because he was a smart man, he suddenly understood the boss's unspoken meaning.
The spirit of contract? Isn't the most rigorous contract the law?
The question of whether the law should be the sole criterion, or whether human sentiment should be considered outside the law, has come full circle again.
Fortunately, Wang Xiao wasn't a teacher instructing students, trying to correct the child's thinking.
She finished the last sip of her juice, got up, and left.
That's right, she's been staying at the restaurant until now just to finish her freshly squeezed juice.
Otherwise, it would be such a waste.
With current logistics capabilities, it's not an easy thing to enjoy freshly squeezed pineapple juice in Shanghai during the frigid spring months of January.
Zhou Liang wanted to stay at the restaurant and continue to vent his frustrations with the shareholders.
This is insider trading from beginning to end, with special privileges involved. If this continues, the stock market will be completely ruined, and no one will be able to participate anymore.
But his purpose in coming here today is to continue serving the boss.
The boss had already left, so even though he was unwilling and his chest was burning with anger, he could only obediently follow the boss out of the restaurant.
What can you do? You have to accept your fate and obey orders. No matter how much you learn, it's still the same.
Tang Yicheng's heart was itching like a cat's claws; he really wanted to go to the Shanghai Stock Exchange to experience the market in person.
Whether it's a million or not, it doesn't matter to him.
The key point is Wang Xiao's three hundred million yuan, which just flowed out so smoothly. Who wouldn't be excited to see that?
Unfortunately, Tang Yicheng didn't dare to leave either.
It wasn't that he was afraid to make decisions on his own; given his qualifications and his relationship with Wang Xiao, even if he left now, Wang Xiao wouldn't have any objections.
But would Tang Yicheng dare to do it?
Her reaction to a huge sum of 300 million was so calm it was practically nonexistent, which was even more frightening!
Have you ever read "Fan Jin's Success in the Imperial Examination"? He's worried that Wang Xiao is like Fan Jin, already blinded by greed and deluded!
What if she suddenly goes crazy? Where is he going to find a butcher father-in-law to slap her and bring her back to her senses?
Forget it, we can see interesting things anytime, there's no rush.
If something happens to her, we'll all be doomed.
So Tang Yicheng suppressed his restless heart and went out to take the elevator together.
In the elevator lobby of the upscale hotel, LED strips encircled the ceiling, illuminating every vein of the dark gray marble floor. The inability to see shadows inexplicably reminded him of the operating lights in a hospital operating room, causing him to involuntarily tense up.
Sure enough, once the elevator doors closed, Wang Xiao turned to look at Zhou Liang and whispered, "Don't you think the Ministry of Finance shouldn't have raised the coupon rate on the 327 Treasury bonds?"
Here it comes! Tang Yicheng's back hairs involuntarily stood on end.
Unfortunately, the person being questioned was unaware of the danger and was staring blankly at the reproduction of Browning's masterpiece "The Night Watch" hanging on the elevator wall.
It is said that this oil painting actually depicts the scene of the militia company before their daytime patrol. However, Browning's emphasis on the interplay of light and shadow resulted in only two officers and a little girl peeking out from the crowd facing the light, while the other militiamen were hidden in the shadows.
It felt like walking in the dark.
The wall lamp design, which hides the elevator behind the picture frame, highlights this contrast between light and shadow, truly echoing Lao Tzu's words: "The way of man is to take from those who have less and give to those who have more."
Zhou Liang was deep in thought when he heard this and blurted out, "Of course, this is the most basic economic principle."
Fearing his boss would seize on his weakness again and press him about what principles meant, he quickly emphasized, "To put it bluntly, government bonds are a financial investment tool, a wealth management product. With any wealth management product, making profits and losses is normal. Intervening with it through administrative means will completely destroy the entire market."
Once he said it, he was prepared to be refuted, even to the point of being speechless.
But to his surprise, the boss actually nodded: "You are a top student from Shanghai University of Finance and Economics, you have a wealth of professional knowledge, so you know this."
Zhou Liang was a little flattered, his heart soaring with the elevator's upward momentum. He subconsciously offered a humble reply: "This is just common sense."
Tang Yicheng glanced at him from the side.
Although Brother Tang didn't know why the boss said that, his intuition told him that Zhang Junfei's recruited bumbling financial manager was probably celebrating too soon.
However, it seems he misjudged again this time.
Because the boss didn't immediately knock out the simpleton, but instead continued nodding: "Yes, you've been in Shanghai for seven years. The people of Shanghai are known for their financial acumen. That's common sense for you. After all—"
She smiled and said, "Back in 1988, people in Shanghai already knew how to make a fortune by reselling treasury bonds. Besides Yang Baiwan, it seems that Wanguo also made his first pot of gold through treasury bonds."
Zhou Liang nodded subconsciously.
Indeed, the most senior veterans in the securities market all started by reselling treasury bonds in other regions, including Kan Zhidong of Shenyin Securities, who was as famous as Guan Jinsheng.
Wang Xiao watched as the elevator floors lit up one by one, and finally said the turning point: "However, this just shows that most people in the country outside of Shanghai simply do not possess the common sense you are talking about."
When Zhou Liang heard the word "but," he couldn't help but tense up.
With a "ding," the elevator arrived at the floor, and the gleaming metal doors slid open to both sides.
Wang Xiao lifted his foot and walked out, smiling as he left a sentence: "Otherwise, people in other places wouldn't sell their treasury bonds to them at such a low price."
She sighed, "It's all because no one told the people in these areas that treasury bonds could be redeemed at banks starting in 1988."
Zhou Liang's face flushed slightly. Because, in a sense, the rise of these securities tycoons was actually a process of plundering the wealth of ordinary people.
This kind of plundering is not the same as going to the countryside to buy antiques at low prices and then reselling them.
Because the price of antiques is determined by people and is full of uncertainty. On the other hand, the value of treasury bonds is printed on the face of the bond, and the interest is also fixed.
It was only artificially devalued during a specific period due to a general lack of financial knowledge among the people.
Wang Xiao did not comment on the moral character of the securities tycoon; making money by exploiting information asymmetry is a universally accepted principle.
She brought up treasury bonds simply to illustrate that the general public in this era lacks financial knowledge.
What professionals consider common sense is a completely different world to them.
“I’d even bet you that if you ever have time to go back to your hometown, you can take a stroll through the rural villages and towns. See if there are still many families who have kept treasury bonds. They still don’t know that the treasury bonds they have can be redeemed for money at the bank.”
Zhou Liang couldn't refute his boss's words.
This is true. Shanghai and his hometown are not far apart, yet it feels like they live in two different times and spaces.
The regional and urban-rural disparities in this country are astonishingly large.
Wang Xiao did not return to her room.
Although she was staying in a suite with a separate living room and bedroom, she was afraid that going in would disturb Ivanov, who was asleep.
The poor fellow had been traveling for over ten hours and was exhausted.
As a considerate partner, she certainly shouldn't bother him at this time.
Otherwise, the persona she has painstakingly maintained all the way from Moscow to now will collapse.
So she chose the balcony at the end of the corridor.
This is where the staff hang out their blankets and sheets to air out, and there are also coffee tables and chairs for everyone to relax and unwind.
Unfortunately, this was clearly not a good time to sunbathe, and there were no other guests besides them.
Wang Xiao didn't sit down, but stood by the balcony railing.
The early spring wind, carrying the moisture from the Huangpu River, brushed against my face, with a touch of biting cold. On the opposite bank, Puxi was a cluster of shikumen houses and old Western-style buildings, while Pudong, at my feet, was still a vast construction site.
A river separates two worlds.
"Therefore," Wang Xiao concluded definitively, "at least for the buyers of the 327 Treasury Bonds, it was not a financial product. When it was issued in the summer of 1992, the 14th National Congress of the Communist Party of my country had not yet been held, and the Chinese government first explicitly proposed the establishment of a socialist market economy system at the 14th National Congress held in October of that year."
She shook her head. "So you can't expect the people of the whole country to understand the financial product attributes of government bonds just because you have a wealth of professional knowledge, studied in Shanghai for seven years, and think that you are surrounded by the world. You can't expect them to understand that buying government bonds in the summer of 1992 was for financial investment."
Tang Yicheng almost burst out laughing, because Zhou Liang's face was turning red and then pale, and he wished he could find a hole to crawl into.
Even so, the latter was still incredibly audacious, relying on the pride of a professional to emphasize to the boss: "But no matter how much you say, it doesn't change the fact that government bonds are government bonds; they are still financial products."
As the chimes of the Bund Customs House echoed across the river, the sounds of pile drivers slamming their hammers down on the construction site rose and fell in unison, as if in a standoff.
Wang Xiao shook his head and emphasized again: "No, your understanding is too dogmatic. Because the issuance process of 1992 treasury bonds was not the way a financial product should be."
Why? Because they can't be sold; nobody buys them.
Unlike 30 years later when government bonds were regarded as a safe way to preserve value and the market response was enthusiastic, government bonds in the early 1990s were really ignored.
The early spring wind made the bed sheets and duvet covers on the line rustle, and the billowing sheets looked like sailboats about to set sail.
"It is precisely because the issuance of government bonds is not going smoothly that the country has introduced the trading methods of developed countries and launched futures contracts to make government bonds more liquid and price-elastic, so as to attract investors."
Wang Xiao looked at Zhou Liang and said, word by word, "You should know what methods the issuer of government bonds would use to promote government bonds in order to complete its task under such circumstances."
What methods? Zhou Liang actually knew.
This is no secret. Forcibly allocating national debt is just like forcibly allocating treasury bonds back then; it's something that's openly and honestly done.
"In 1992, who would buy government bonds?" Wang Xiao sighed, looking at the pedestrians and vehicles on the road, and guessed, "There are probably three types of people: one is those who are purely contributing to the country and don't care about the final result; another is those who are forced to buy them and suffer a great loss; and the third is the investors you mentioned."
She raised three fingers, then lowered her index and ring fingers. "I guess the second type makes up the majority."
Yes, it's that cruel.
The situation became so brutal that in 1993, the government even issued regulations prohibiting local governments from imposing securities on ordinary people.
"Local governments are also trying to meet their own work targets, and the central government is well aware of this. Can you say that the buyers of this kind of sales activity, which can be described as being imposed through administrative means, are making their own investment choices?"
Zhou Liang was speechless.
Obviously not.
This is also one of the points he criticizes most about the domestic securities market: too much administrative intervention.
We've been reforming and opening up for over a decade, yet we're still doing the same old thing.
Wang Xiao countered, "Since these are not market behaviors chosen by the buyers themselves, why should those who are forced to purchase them bear the loss of treasury bonds, whose interest rates are several percentage points lower than those of bank deposits for the same period?"
"Yes! You've calculated it very clearly. A 12.98% inflation-indexed subsidy rate will cost the Ministry of Finance about 1.6 billion yuan more. But shouldn't that be the case?"
Wang Xiao's voice rose involuntarily, "Since the purchase wasn't a purely market-driven transaction but rather a sales process facilitated by administrative means, why can't the Ministry of Finance use administrative measures to compensate the buyers for their losses?"
Zhou Liang's head exploded with a "buzz," shattering his entire world.
The sun had shifted its position, and the sunlight shone on Wang Xiao's face, blurring her features.
She let out a soft sigh in the halo of light: "Yes, I know you want to completely copy the financial markets of developed countries to our country, hoping that we can also establish a vibrant financial market. But—"
She emphasized her next words, "When China began to take the socialist road, it did not completely copy foreign experiences, but instead used the strategy of encircling the cities from the countryside and taking the socialist road with Chinese characteristics."
"Why? Because oranges grown south of the Huai River are sweet oranges, while those grown north of the Huai River are bitter oranges. Every country has its own national conditions. If you completely copy someone else's homework, the biggest chance of it not being suitable will be that it doesn't suit the local conditions."
"The success of shock therapy in Poland does not mean it will work in Russia. Blindly copying it without considering the actual situation and national conditions will only lead to devastating consequences."
Zhou Liang lowered his head so low it was almost touching his chest, but the boss still showed no sign of letting him go.
"Why do you ignore the fact that the general public in our country lacks financial literacy? It is precisely because of this kind of blind copying that you confuse them with the people in developed capitalist countries and think that they should be like that."
"They even believed that if the government and the people could not do it, then it was the fault of our government and the people."
Wang Xiao shook his head, “But that is precisely your fault. You have suffered from the arrogance of intellectuals. You did not conduct down-to-earth investigations to understand and grasp the true national conditions. Instead of thinking about and solving problems on this basis, you arrogantly recited from the book and forced others to accept your set of ideas that were completely incompatible with the local context.”
The higher you climb, the colder it gets; the early spring wind was fierce, blowing Zhou Liang's face red. It felt like a heavy slap across his face.
Wang Xiao let out a long sigh and said seriously, "Put aside your arrogance and your fascination with the Western financial system. Otherwise, you will lose objectivity, be swept away by emotions, and forget the most basic composure."
Wang Xiao looked at him seriously, "That's not the kind of financial talent I need. I need you to build a complete financial team. I have high expectations for you. The next five years are crucial for you to establish yourselves in the group."
She had never originally intended to get involved in financial investment.
As an unlucky person whose stocks were stuck before she transmigrated (damn Wuliangye!), she didn't think she had any talent in this area, so she didn't touch finance at all after transmigrating.
Even in Moscow banks, the fundamental purpose of ruble-dollar transactions is simply to offset the huge loss of wealth caused by the devaluation of the ruble.
But now she understands that in this era, if she wants to realize her dreams, she can't avoid getting involved in finance.
For example, she would definitely do things like acquiring shares in certain companies.
What if there's no qualified personnel? That's why she's recruiting.
The new team, at its most basic level, has already received answers from the experience of the Sanwan Reorganization: ideological transformation is the first step and an indispensable foundation.
She doesn't need a team with a self-righteous comprador mentality.
Tang Yicheng was about to curse when he saw Zhou Liang still staring blankly.
Zhang Junfei, that clever monkey, is as cunning as a ghost. How did he end up attracting such a clueless person?
However, Zhang Junfei was someone he pushed in front of Wang Xiao, so he was considered half of his men.
Tang, who was seething with anger, pinched his nose and forced himself to remind Zhou Liang, "What are you standing there for? Hurry up and agree."
This is a once-in-a-lifetime opportunity! You'll be able to lead your own team!
He cursed inwardly: So many people have waited for so long, and some may never get such a good opportunity in their entire lives.
In other words, you're lucky; your boss suddenly became interested in finance.
Otherwise, go somewhere cool and stay there.
Zhou Liang then came to his senses and nodded haphazardly: "Okay, boss, I will definitely go and recruit people properly."
Wang Xiao smiled and comforted him, "Don't worry too much, you should be able to recruit more people later."
Zhou Liang was bewildered: "Why?"
In fact, his choice to work for a private boss made him a complete oddball among his classmates.
Working for large state-owned financial institutions like Wanguo Securities, Shenyin & Co., or the Shanghai Stock Exchange is more in line with the career choices of contemporary college and graduate students.
“Because the chaos has only just begun.” Wang Xiao sighed softly. “You don’t think the 327 incident is over, do you? No, quite the opposite, the turmoil has only just begun.”
This time, Tang Yicheng was bewildered: "What else do you want? It's just a company violating regulations. The final transaction has already been cancelled. What else can we do?"
It's no big deal.
The domestic securities market has only been around for a few years. Everyone is feeling their way across the river, so it's perfectly normal to make mistakes and encounter problems.
If you're wrong, just correct it; there's no need to resort to violence.
Wang Xiao just smiled, not answering the question directly: "Just wait and see, this matter won't end so easily."
Zhou Liang nodded: "Yes, the Shanghai Stock Exchange's announcement said it would deal with member companies that violated regulations. China Economic Development Trust & Investment Corporation (CEDTIC) also violated regulations. Yesterday morning, the price surged within five minutes of the market opening; it would have been impossible without violations. This time, if they're going to deal with them, they'll definitely be dealt with together."
Wang Xiao rubbed his forehead, utterly helpless: "Why haven't you figured it out yet? What's the point of still clinging to the China Economic Development Trust and Investment Corporation?"
Zhou Liang, despite not having been away from school for long, still retained his scholarly spirit: "Even princes are subject to the same laws as commoners. Just because he is the heir to the Ministry of Finance doesn't mean he can do whatever he wants."
"Who exactly is doing whatever they want?" Wang Xiao couldn't take it anymore. "Is Wanguo's real problem over-leveraging? Everyone does have that problem. But its biggest problem is price manipulation! Aren't you very envious of Western financial markets? Then let me ask you, which country's mature financial market would allow wash trading? Wash trading alone is enough to land you in jail."
She couldn't help but complain, "Your General Manager Guan has gone mad. He's been praised too highly and gotten carried away. He doesn't understand his own position or the national situation anymore. He thinks he's the most important person in the world. At least General Manager Wei of the Shanghai Stock Exchange is nominally his superior, right? People respectfully call him 'Old Guan,' which is a sign of respect for a senior. How can a subordinate like him call someone 'Little Wei'? This isn't just being informal; it's utterly arrogant!"
Zhou Liang's face immediately turned as red as if a fuel shop had been overturned, his face flushed and his mood was in complete disarray.
He must have felt uncomfortable being talked about his idol to his face by his boss. But if you really think about it, he has to admit that his boss was right.
People carry you in a sedan chair; if someone gives you face, you should reciprocate and make sure they have a grand occasion.
However, one thing is one thing, and no matter how badly the top leader of Wanguo behaves, it does not change the fact that China Economic Development Trust & Investment Corporation (CEDTIC) violated regulations.
Those who deserve to be dealt with should be treated equally.
"Don't even think about it." Wang Xiao waved his hand dismissively. "I'm asking you, who's standing behind China Economic Development Trust and Investment Corporation?"
Zhou Liang asked in surprise, "The Ministry of Finance?"
This is a well-known fact: China Economic Development Trust & Investment Corporation (CEDTIC) is a subsidiary of the Ministry of Finance, which is why it can be so brazenly arrogant.
Wang Xiao pressed further, "Then who's standing behind the Ministry of Finance?"
Zhou Liang got stuck. Is there even a need to ask? The Ministry of Finance is backed by the Central Government; it's the central government's Ministry of Finance.
Wang Xiao lowered his voice: "Then who is standing behind Wan Guo?"
The answer is obvious to everyone: the Shanghai Municipal Government is behind Wanguo.
That's what Zhou Liang thought, and that's his answer.
Wang Xiao laughed: "You already know, so what's the point of asking? Don't forget, what was the essence of last year's tax reform?"
It's a game of strategy, and everyone knows that—it's a game between the central government and local authorities.
Wang Xiao sighed softly: "The game is everywhere. There is fierce competition in policy dominance, resource allocation, and regulatory framework."
Decentralized financial reform is inherently unsustainable. The central government needs an opportunity to consolidate regulatory power and suppress local financial powerhouses in order to establish a financial governance paradigm of "central leadership and local implementation".
The 327 Treasury bond crisis just happened to present such an opportunity.
Looking at Zhou Liang, whose pupils were dilated as if struck by lightning, Wang Xiao warned him: "Never forget this. If you're doing finance in this land, you're finished if you ignore this."
To completely separate economics from politics when looking at a problem is not professionalism, it's naivety, immaturity, and a fundamental misunderstanding of the nature of economics.
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Note: The main references to the "327" treasury bond turmoil mentioned in this article are: "Clearing Away the Fog of History" by Peng Jieyun, published in *First Financial Daily*, February 11, 2015, page A06; *The Rise of Capital: A Record of Twenty Years of Turmoil in the Chinese Stock Market* by Zhao Di, deputy editor-in-chief of *Stock Market Dynamics Analysis* magazine; and "A Financial Turmoil That Shocked the Nation—A Report from the '327' Incident" by Sang Yu, published in the April 1995 issue of *Securities Market Herald*. The market trend data for 337 and 319 mentioned in this article comes from this report.
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