Chapter 12: Whose Bull Market Is It?

Before the onset of the Sino-American trade war, China and the United States engaged collaboratively in the global division of labor, sharing mutual benefits. At that time, Western capital deeply penetrated the reform of China’s state-owned enterprises into joint-stock companies. Foreign investment had a presence in the leading enterprises across nearly all of China’s industries.

Following China’s accession to the General Agreement on Tariffs and Trade, one could say that China hitched a ride on America’s coattails, achieving rapid economic growth. China produced vast quantities of daily consumer goods for Europe and America. The phrase “One hundred million shirts for one Boeing airplane” vividly captured the spirit of Sino-American industrial cooperation in that era.

While the United States enjoyed high-quality, affordable consumer products from China, it simultaneously maintained low domestic inflation and experienced significant technological advancement. During this period, China and the United States were comprehensive partners in a shared interest community—an absolute honeymoon phase. The bull markets in China’s stock exchanges also aided Western capital in preserving and growing its wealth.

Thus, before the pandemic, foreign investors consistently reaped abundant profits from every bull market in China. These bull markets aligned with Western interests; they actively fueled China’s surges in stock prices by every means possible. Unfortunately, due to China’s stock market navigating uncharted waters with an inherently flawed institutional system, its market was prone to wild volatility—intense rallies followed by prolonged downturns.

Yet, with each boom and bust, Western capital skillfully timed its moves to secure enormous speculative gains. Back then, the simplest way to make a stock soar was to brand it with the label “Chinese demand,” and that stock would rise dramatically. Leveraging globally established financial rules favoring Western capital, backed by a worldwide financial infrastructure serving Western interests—investment banks, accounting firms, legal entities, rating agencies, clearinghouses, financial research bodies, academia, financial media, and powerful funds acting as enforcers—Western capital executed a series of seemingly legitimate manipulations of global financial markets. This enabled them to cash out at peak valuations on Chinese stocks, with Warren Buffett being a quintessential example.

By exploiting the unique status of the U.S. dollar, America conducted a tidal extraction of wealth from the global economy, sustaining a prolonged 30-year gradual bull market in its own stock market. This healthy slow bull market fostered successive waves of technological revolutions—from the internet to artificial intelligence. These revolutionary technological breakthroughs rapidly enhanced productivity and repeatedly defused domestic economic bubbles in the United States.

Bathed in this aura of success, the U.S. shifted comprehensively toward a virtual economy, where financial capital supplanted industrial capital. With the dollar’s financial dominance controlling global productivity, the American strategy became to transform all other nations into vast factories serving the United States.

Over the 40 years of reform and opening-up, Chinese enterprises strived and rose vigorously. Meanwhile, Western capital, after cashing out at high points in Chinese stocks, gradually withdrew from the real economy. Foreign enterprises’ advantages in China dwindled, and many abandoned the Chinese market. This was especially true for the U.S., which largely forsook industrialization, transitioning fully toward a virtual financial economy. The industrial space vacated in China was almost entirely seized by Chinese firms, with China now standing as the world’s only country encompassing all industrial sectors. In manufacturing, no one can now effectively choke China’s supply chain.

China today is undeniably a manufacturing powerhouse, though not yet a global industrial superpower. In many specialized fields, Chinese products may not yet match the performance of European or American goods, but that does not mean there are no viable Chinese alternatives.

China’s present imperative is to advance into high-end industries and cultivate new, qualitative productive forces. None of this is possible without financial support—without a prolonged, healthy bull market akin to America’s three-decade-long one.

Finance must empower technology with wings; technology must supply revolutionary innovation to productivity. This is the historic mission the Chinese stock market must undertake amid the once-in-a-century grand backdrop of Sino-American rivalry.

Yet history does not unfold according to human hopes. The very story of human civilization is, at its core, a history of conflict.