Subscribe to our newsletter and stay updated on the latest Chinese business and finance news. We’ll send you a daily digest email called “myFT Daily Digest” that covers everything you need to know.
Xiaozuowen, which means “little essay” in Chinese, has become a popular social media phenomenon in China. Traders and investors are turning to this unverified news format, typically shared as images in messaging groups, to bypass text-based censorship imposed by platforms like WeChat.
The Chinese securities regulator is facing challenges in dealing with the impact of Xiaozuowen on share prices. As government control over information becomes stricter, traders and investors are relying on alternative sources for news.
Xiaozuowen is often a small piece of unverified news shared as an image in WeChat messaging groups or other social media platforms. It gained prominence during the Covid-19 lockdowns when official media outlets lacked clarity, leading to speculation online. In fact, a four-paragraph screenshot suggesting a shift towards reopening caused a two-day market rally and added $450 billion to the MSCI China Index.
Now, text screenshots claiming upcoming policy changes in various sectors are attracting attention from investors and regulators concerned about their accuracy and motives.
A trader of mainland Chinese stocks in Shanghai, who prefers to remain anonymous, said, “Other official information and data are even more unreliable and won’t tell you anything new or surprising about China at the moment. What if these Xiaozuowen posts are actually true?”
The China Securities Regulatory Commission recently fined Esteel, a small commodities consultancy, for sharing false and unverified information on WeChat. The consultancy claimed that Tangshan, China’s main steelmaking city, would impose production curbs and that Rio Tinto would reduce its production. Consequently, the price of iron ore futures increased by 7.6%, representing billions of renminbi.
Xiaozuowen’s popularity reflects the lack of reliable information services in China, according to Tan Yifei, the founder of Beijing-based consultancy Jince Frontier.
Traders from China and Hong Kong admitted to reading Xiaozuowen posts and relying on them for trades, mainly due to the fear of missing out. These posts are not groundless but reflect the market’s expectations regarding policies, says an anonymous economist from an Australian investment bank.
China’s policymaking process has become increasingly opaque in recent years, with power centralized under President Xi Jinping. Geopolitical tensions have also affected domestic communication.
Xiaozuowen posts, which appear every few days, often leak policy drafts, internal memos, and partial transcripts of meetings. While their authors are usually anonymous, various entities are creating or circulating them, including commentators, brokerages, and property agents.
The property market is a popular subject for Xiaozuowen speculation, especially regarding potential stimulus measures from the government. For instance, shares of developer Longfor increased by 8% after a text screenshot claimed that home purchase restrictions in second-tier cities were about to be lifted. However, there was no immediate announcement to support this claim.
Quantitative traders have developed sophisticated strategies to incorporate Xiaozuowen into their trading. It is seen as a “secondary game” that arises when investors have to look for the next change in expectations due to a lack of trading opportunities.
While some traders act quickly upon receiving Xiaozuowen headlines, most are becoming indifferent to the practice due to its overwhelming volume.
Denial of responsibility! VigourTimes is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
