DARING TO EAT CRAB
Yang was born in Zhenjiang, a city in the east of China.
His parents moved to Shanghai whilst Yang was still a small boy. His father worked in a tax office (leaving him with a great respect for the idea of taxation) and his mother was a social worker.
China had recently turned communist and there was an emphasis on the importance of work. The relevance of education was dismissed, so after finishing primary school Yang was sent to work in a state-owned steel factory.
Yang rose to be a warehouseman, earning 41 yen a month by the mid-1970s (£4.60). It was a secure job, known in China as an ‘iron rice bowl’.
Yang was a lifelong sufferer from diabetes.
China changed with the death of Communist leader, Mao Zedong (Chairman Mao) in 1976 – and Yang took his opportunity.
Deng Xiaoping became the leader of the country in 1979 and announced there would be a gradual introduction of decentralisation (and with it, capitalism).
When Deng was questioned about changing China’s economic system from communism to allow private investment, he replied, “Cats, whether black or white, are good – as long as they catch mice.”
In 1988, Yang read a newspaper article that stated China was about to open the government bond market. This meant that investors could buy and sell shares in Shanghai and six other specified cities.
The market opened on the 21st April 1988. Yang took all his savings and bought as many bonds as he could, in the Vacuum Electrics company. A few hours later, the price rose and he sold them all. In just a few hours, he had made a profit of 800 yen, the equivalent of two years’ wages working.
By modern standards, there was nothing special about what he had done – but in a China just coming out of communism, it was a revelation – “People in China had become used to the old ways of doing things.”
Yang then read in a newspaper that bond prices differed in each of the seven cities involved in the scheme. He took a train overnight to the city of Heifei and came back with a green plastic holdall stuffed full of shares (he had no chequebook), which he sold for a massive profit in Shanghai the following day.
He began to travel from city to city, buying where the bonds were cheapest, selling where they were expensive.
It is believed he was the first private individual in China to buy a cash register.
As China’s first private player of the stock market, Yang quickly earned a fortune. He was nicknamed ‘Yang Million’ (Yang Bai Wan) by the Chinese media. He was also known as ‘The Stock God.’
He used an ancient Chinese phrase for the willingness to take a gamble – “Daring to eat crab.” (It refers to the fact that most of China’s population is landlocked and have never seen, or eaten, a crab).
Nevertheless, he was an honest man and was uncertain if he was breaking tax laws. He knew ‘speculation and profiteering’ were technically still illegal, so he went to a tax office to declare his earnings and see if he owed any money.
Yang was delighted when a tax inspector told him, “No one is required to pay tax for earnings from trading government bonds.”
Yang became extremely popular because of his rags-to-riches story. He gave the country hope. If he could do it, so could you.
He was Communist China’s first millionaire and he seemed to reflect Deng Xiaoping’s mantra of, ‘To get rich is glorious.’
Yang lived in a tiny one-room apartment with weeds growing outside, next to a pile of coal for heating.
He was a chain smoker. He wore polyester clothes, preferring polo shirts to suits. Yang’s proletarian image just increased his popularity – one of the people.
Yang was not just lucky – he proved to be a market player of high quality, managing to totally avoid the 1993 market crash in China. He realised the Shanghai stock market had suddenly risen twelve times. He thought this unnatural so sold every stock and share he held – just in time before it crashed.
He did his research meticulously and studied Government policy intently. Yang worked eight hours a day, seven days a week.
He was cautious and not greedy. Yang always said to himself, “What is safe for my wallet?”
When asked the secret to getting rich, he said it took time, patience and hard work. “You can’t reach the sky in one step.”
Yang also said you had to be prepared to accept losses (as he did on some occasions) and never put all your eggs in one basket. He once saw a trading partner go bankrupt due to over-investment in one company.
Occasionally, Yang gave advice and sometimes people lost money. He said they were often greedy and not willing to put the effort in to achieving success. “People who make money blindly are bound to lose money blindly.”
Yang was the first private citizen in China to hire personal bodyguards and also private lawyers after a securities company tried to cheat him.
Yang was encouraged to move into American markets but refused – saying he did not understand the background and conditions of the Dow Jones Index, or how it worked.
He was compared to the American billionaire, Warren Buffet. It tickled Yang that the American media referred to him as the ‘Chinese Buffet’.
By the 1990s, others had caught Yang up, overtaken him and his influence began to wane. Nevertheless, he continued trading bonds.
It did not worry him that others were now making more money. “Everyone has to learn to be satisfied.”
Yang continued to advise banks, tax authorities – and the Chinese government.
He was offered a professorship at a university but turned it down. However, Yang did write five books and ran a securities workshop in Shanghai.
Asked the secret to his success, he said, “Hunt the bottom, avoid the top.”
He also said, “The only money you really have is in your pocket.”
Little is known about his private life, although he was married, and had one son, Yang Yuqi, who has inherited the business empire.
Yang died of complications from diabetes.
Chinese State television called him a ‘National hero’.
Yang had said that he was “Willing to be the stone that paves the road for the development of China.”
Although the Chinese stock market has dramatically changed from individual to corporate investors, Yang is still seen as an innovator – “Yang encouraged many to join the world of investment, and showed the leaders of the country that a capital market can work in China as it does in any other society.”
There are currently 180 million stockholders in China, as opposed to ‘just’ 95 million members of the Communist Party.
RIP – Repeatedly Investing Profits
