GameStop’s wild ride and other risks just add to China’s appeal as a safe haven

A majority of Asian stock markets are relatively smaller and less liquid than those in the West, perhaps giving less scope for buying frenzies. Indeed, China is looking attractive as a haven for global investors seeking to hedge against rising risks

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An elderly woman shops in Beijing. The Chinese economy has made a V-shaped recovery from the pandemic, and the government’s emphasis remains on social and financial stability. Photo: AFP

Cheah Cheng Hye is the chairman of Cheah Capital, a single-family office, and honorary chairman of Value Partners Group, a Hong Kong-listed fund management company.

Published: 3:30pm, 3 Feb 2021Updated: 4:31pm, 3 Feb 2021

The social media-fuelled mania in stocks like GameStop could trigger a global political crisis. Inevitably, this frenzy will end in widespread losses because such trading decisions are not based on fundamental value, but are a kind of internet gaming on a massive scale.

When losses build up, there could be an explosion of anger, and protest movements like Occupy Wall Street could return. Then, it would be difficult for the world’s central banks to increase interest rates even when it becomes necessary, as central bankers would be held hostage by the need to appease the crowds.

Governments could be held hostage too, as it would be hard to cut back on subsidies for businesses and ordinary people. The net result would be that badly affected countries could become ungovernable. Rising debt and money printing erode the purchasing power of paper money and stoke inflation.