SHANGHAI -- Yang Huaiding's nickname is "Millions," and he earned it the hard way: by using China's fledging securities markets to parlay a small nest egg into a relative fortune.
Portly and bespectacled, with a crop of badly cut hair, Mr. Yang, 42, is China's first successful independent bond and stock investor. His net worth now easily exceeds one million Chinese yuan (roughly $186,000). And his story would do justice to Horatio Alger.
A former steel worker, Mr. Yang started down the road to riches with his life savings of about $2,000 and what he calls "a primitive ambition" to make something of himself. He also had gained enough knowledge from reading U.S. financial texts to pioneer in spotting profitable cracks in China's immature securities markets.
"I am just a small pebble on the road to China becoming rich," he says with the sort of tongue-in-cheek self-effacement that remains politically necessary here. "From me as an individual, you can see the great changes taking place in China."
Among those changes is the opening of the year-old Shanghai Securities Exchange to foreign investors, who have recently been allowed for the first time to buy a limited number of shares in a state-run Chinese company.
Though the exchange is still far from an ideal market, foreign demand is so high that the first issue for foreigners is being touted at a 400 percent premium.
But that is light-years ahead of the state of China's financial markets when Mr. Yang began speculating in the mid-1980s by traveling to small towns near Shanghai to buy state bonds.
Rural bondholders, who had been forced to accept the paper in lieu of part of their salaries, were more than willing to sell at a steep discount. At the time, there were few secondary markets or even regulations governing such transactions.
But in savvy Shanghai, China's pre-communist financial capital, enough closet capitalists remained that streetside bond markets were blossoming. Every trip to the countryside netted Mr. Yang as much as $900.
By mid-1989, gray markets in the few stocks issued by Shanghai companies also were heating up. And Mr. Yang plunged his bond profits into some of the eight stocks that were eventually listed when the Shanghai exchange, China's first, opened in December 1990.
If anything, Mr. Yang is a student of the psychology of Chinese consumers. He knew Chinese workers have been saving 40 percent of their salaries, savings now estimated to average a year's worth of consumption for every one of China's 1.1 billion residents. He also knew they had few places to invest that money.
So, as he expected, the Shanghai exchange took off like a rocket -- so much so that officials had to limit daily share price increases to 5 percent, then 3 percent and now 1 percent in an effort to control bullish speculators.
In the spring of this year, after his stock investments had grown bymore than 500 percent, Mr. Yang quietly began to sell off -- massive sales that prompted the market's first downturn but left him with huge profits.
"All those who buy stocks are fools," Mr. Yang says he learned in the process. "And I made a lot of money from those fools."
"Millions" Yang now sits in his ordinary two-room apartment in north Shanghai, charting the market's daily swings on his personal computer and waiting for the right time to reinvest.
He is so besieged by callers and letters asking for money and advice that he no longer goes to his small office, employing instead four friends to gather information for him. A beeper on his belt and a bright orange telephone at his side are his financial lifeline.
Mr. Yang may be on the sidelines, but an estimated 90,000 individual traders have taken up the slack. The Shanghai market's index, which began at 100, now stands at about 200. Daily bond and stock trading volume has reached about $6 million, and the total value of the 39 listed bonds and stocks has grown by 50 percent in the last year to reach more than $1.1 billion.
"Many investors, particularly young ones, don't have any concept of risk," says Wu Yalun, the exchange's assistant general manager. "We don't worry about too few investors. We worry about too many."
By international standards, the Shanghai exchange is deeply flawed. Market regulation is weak, China's corporate law undeveloped, firms'accounting practices shaky and their financial reports unreliable. One Chinese company, Shanghai Electric Vacuum, accounts for 80 percent of the market's total stock value.
For foreigners, there also is a risk from China's continuing devaluation of its state-controlled currency.
Despite these problems, foreign investors are lined up to jump in. "It's purely a speculative market, a small casino," says Frederick R. Burke, who watched the Shanghai market's development while based here with the U.S. law firm Baker & McKenzie. "But these aren't stupid people: They're aware of the risks and the big potential for profit."