The Wall Street Journal Markets section today [Chinese Regulator Probes Stock Sales] tells the story of the first investigations of senior leaders and those who hold 5% or more of stock in a company being investigated for selling off their stocks before losses in the market catch up with them. In a free market economy we would call that good business, but the Chinese have been told they have to hang onto their stocks for the greater good. This has a nice ring to it. Jack Lew might try it when he gets done with the Iran Nuclear deal.
The Journal puts it this way: "AVIC Heibao Co., a manufacturing subsidiary of Aviation Industry Corp. of China, known as AVIC, said Wednesday that shareholders Jincheng Group and AVIC Investment Holdings had received notice of the investigation from the China Securities Regulatory Commission. The regulator didn’t disclose further details of the investigation.
In addition, AVIC Capital Co., AVIC Heibao’s trading arm, dismissed General Manager Yang Shengjun on Wednesday, after AVIC Capital told the Shanghai Stock Exchange that AVIC Heibao is being probed by the regulator for selling shares on Tuesday."
These are undoubtedly firms that have benefited from the bailout the Chinese have been doing on stocks, and they are saying to their industry leaders that they can't sell to keep from losing money, nor presumably from making money if the stock rises on the state investments. This is what state managaged comapnies really are in China. When we say "state-managed or state-owned" we rarely stop to think about what that really means. Their companies are not like ours.
We might complain loudly about the benefits to a company from a government bailout like TARP, but the Chinese version is quite a bit different. That would not be to the liking of most industry leaders who do business there, who are not getting bailed out.
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