Making money in China

Shanghai's economy has boomed

Colin Blane reports from the Chinese financial capital, Shanghai, on the problems facing foreign companies investing in China:

China now has 30m small investors. It seems that making money is the new religion and even churches have been preserved and transformed into trading houses for the local stock market.

Turning pensions to stocks

But in the dozens of small bourses of Shanghai, the atmosphere is more one of a bingo hall than of a boardroom.

Many of the millions of small Chinese investors are pensioners with just a little money and bags of determination to make more.

And success is not always far away.

Success stories

Mr Shi believes in the power of Shanghai's stock market

Shi Hong Xing was working for 20 years for a state-owned enterprise clearing rubbish from the river in the old commercial district of Shanghai, where fortunes were made in the 30s.

For all its reforms, the Chinese government discourages politics and religion. But now there is a diversion: people are allowed to make money.

Mr Shi grasped the opportunity. He may earn only an average monthly wage from his job, but this year he made 30 times that in the stock market.

And he is hopeful: "We expect the stock market to keep going up," he says.

Difficult times for foreign investors

Shanghai's economy has grown at a dizzying pace and multinationals have been drawn by hopes of expanding into China's vast market.

But, even before the current financial crisis in Asia, investing in China had proved difficult for the outsiders.

Shanghai drives China's economy

Bruce Richardson, a financial analyst with ABN AMRO says that all evidence suggests that foreign companies investing in productive assets in Shanghai do not make any money. And those who do, had to go through "a tremendous amount of trial and toil."

This is a lesson that the British joint venture Yahua-Pilkington learned the hard way - along with many other foreign companies in China's unpredictable markets.

The company made a good profit supplying glass for the newly-built 80 storey skyscrapers of Shanghai, until, in the past two years, local companies joined in and prices collapsed.

A lure too strong

But Shanghai is the engine driving the Chinese economy and most foreign investors cannot afford to turn away.

The lure of China's vast markets is still too strong for that.