Xiao Shuyan, "Chasing Mutual Funds"

 
Xiao Shuyan, “From ‘Chasing after Mutual Funds’ to ‘Forming a Group to Pinch Pennies’—Why Does this Generation of Youth Persist in ‘Doing Money’?”[1]
 
Introduction and Translation by Freya Ge and David Ownby
 
Introduction
 
For this installment on China Youth issues, we chose a text on…mutual funds, because, really, what could be sexier?  Actually, the text, by the journalist Xiao Shuyan, is really about Chinese young people’s obsession with money, and mutual funds are just the most recent expression of this obsession—there have been earlier obsessions with stocks, with insurance, with bitcoin...

Reports in the Western financial press confirm that mutual funds have indeed been a major trend in China since 2020, and that youth investors make up a large number of those buying into the funds.  By contrast, for every report that suggests that American young people are displaying a similar enthusiasm for investing, there are maybe ten web sites (like this one) on “the best youth investments,” which are trying to drum up youth interest.  Many young Americans are of course, saddled with heavy debts accumulated to finance their educations, and are paying these off instead of investing in stocks and bonds or in real estate.
 
Chinese young people are obsessed with money because…they need money.  The real estate boom, particularly in first- and second-tier Chinese cities, means that for most of China’s modest if growing middle class, parents are incapable to offer substantial help in buying a first residence.  In addition, an over-supply of university graduates keeps wages from rising rapidly, and enables employers to make demands in terms of time and dedication that would turn many Western youth off (although they might grit their teeth and bear it).  So whether the goal is to make enough money to keep up with the Joneses, or to make enough money to quit the rat race, investing makes a lot of sense.
 
Much of the text investigates what we might call the “culture of youth investment” in today’s China, the Internet groups they put together, the jokes and puns they invent and share online, some of their frustrations, as well as some of their hopes and dreams.  Strangely enough, the American film Nomadland, by the Chinese-American director Chloé Zhao, is mentioned in a positive sense at the end of the piece as a vision of personal freedom with which certain Chinese youths might well identify, although they tend to think more of becoming “digital nomads,” pursuing their passions online—if perhaps in a less expensive city than Beijing, Shanghai, or Guangzhou.
 
For those readers who are using this site in part to improve their Chinese-language reading skills, we might mention that this text is written in a very pleasing style.  Other examples of the author’s work are available here.
 
 
Translation
 
 
With the continued downturn of the mutual fund market since the beginning of the year, the mood of the young people who took the advantage of the funds’ popularity a year ago and "ran to buy mutual funds" has sunk ever lower. The self-ridicule, complaints, and anxiety of young "fund holders" can be seen everywhere on social networks. Jokes like "I’d rather see my lover betray me than see my mutual fund go down 你可以绿我，却不可以绿我的基金"[2] have aroused a lot of empathy. On trading platforms for second hand goods [i.e., the Chinese equivalent of Ebay], "fund loss" has also become the most common reason given for reselling mobile phones and game consoles.
 
A month ago, these same young people were actively getting to know one another in the discussion sections of fund trading platforms, setting up global support clubs and fan groups for rating high-performing fund managers. A month later, the situation is totally different.
 
But whether they are jumping for joy or feeling dejected because of the performance of the fund, financial management—or "getting money 搞钱," in the more common parlance—has become an essential part of young people's lives, as important as dating, work, or following their favorite stars.
 
The explosion of mutual funds is only the tip of the iceberg, and young people are proficient in all kinds of financial management. And behind this obsession  is new understanding and definition of money, work, life style, and even of existence itself.
 
"Money Management" to Fill the Coffers and "Penny-Pinching" to Reduce Spending
 
There was something familiar about explosion of mutual funds this winter, like insurance, which was a hot topic last winter, or bitcoin, or stocks, that were popular in the past. But this time, because the entry threshold was lower (many funds only require an initial investment of 10 RMB), the procedure was simpler (funds can be purchased via commonly-used payment apps), and the investment yield is more intuitive (you can check how much you have earned every day), investors were attracted on a scale that greatly exceeded what we have seen in the past.
 
The biggest difference from past investment and wealth management booms is that young people account for the majority of mutual fund holders in 2020. According to data from the MOB Research Institute, the age group between 18 and 34 accounts for 60% of new fund holders in 2020, which makes it an obvious youth trend. While young people have become the principle holders of mutual funds, mutual funds have also become the first choice of investment for young people. According to a survey on “The Truth about Year-End Bonuses in the 2020 Workplace,” jointly released by Lufax[3] and Maimai[4], 62% of investors born after 1995 have invested in mutual funds.
 
With their natural talent for networking and making jokes, young people have contributed to making mutual funds a hot topic, whether on the "red" side when profits are surging, or the "green" side when the "fund dropped so much that its mother wouldn't recognize it 跌妈不认," all of which further promoted the popularity of mutual funds.
 
A new word has emerged with the popularity of mutual funds:  “income earned while you sleep 睡后收入.”  As the name suggests, this kind of income is money earned automatically while you are lying down, without the investment of time or effort. This is "a necessary prerequisite for financial freedom and early retirement," according to an encyclopedia entry.

​There are three main streams of "income earned while you sleep.”  The first is rent. As long as you own certain assets and rent them out, you can receive a regular rent, and residential rental property currently offers the most stable return. The second is intellectual property rights or patents, ensuring that creators continue to receive royalties as long as their work, such as books, music, and pictures, continue to circulate. The third is financial instruments like insurance, mutual funds, stocks, etc., which can earn money while you sleep, but the possibility of risk exists alongside the hope of a return.
 
In fact, the term "income earned while you sleep" was created by the media in 2018, but the threshold for collecting rent or creating intellectual property rights was beyond ordinary people's reach. At the time, the huge risk of stocks and the meager return on time deposits meant that the income earned while you sleep generated via "financial management" was a mere a drop in the bucket. The word had no appeal to the general public.
 
In 2020, however, good returns on mutual funds made it possible to achieve financial freedom via wealth management. According to Wind financial data, in 2019, the median return on equity-oriented funds reached 35%, and in 2020, the mean return on actively managed equity funds was 48%, among which 55 funds yielded more than 100%. This means that, without working from 9:00 a.m. to 9:00 p.m. six days a week [“996” in Chinese] or all day long every day [007 in Chinese], as long as you buy the right mutual fund, your income will automatically double every year even if you stay flat on your back.
 
Such a happy prospect surely sends peoples’ hearts soaring, and with wealth and freedom so close at hand, it is no wonder that financial management has become a popular way of life. On Douban[5], the "Living off of Interest/Investment and Finance Group" has more than 520,000 members. Here, they share tips on buying funds, discuss possible future investment opportunities, and mourn their losses, while examples of successful investment freedom give hope to all.
 
What is interesting is that we also find a “Crazy Savers Group,” which is on about the same level as " Living off of Interest/Investment and Finance Group," where 560,000 self-described "piggy banks" watch over and encourage one other to achieve the best quality of life with the limited money they have and without spending an unnecessary cent. From big issues like buying a house or changing jobs, to small affairs like buying a canvas tote bag or using a washcloth, the piggy banks ask the group for help, and the online friends put their heads together and give their all.
 
In addition to the "Crazy Savers," popular groups on Douban also include the "Stingy Women's Association", the "Stingy Men's Association" and the "Mutual Encouragement Group for Financial Failure." It looks like young people are “getting money” as best they can by increasing their financial resources and spending less.
 
Behind the Mutual Fund Craze, Few Options for Young People
 
Once upon a time, young people were happy to be the "paycheck to paycheck crowd月光族”[6].  They weren’t married and didn’t have to think about their pension for awhile, and they could “eat to their heart’s content without worrying about family.”  They had a good time, were full of energy, and spent all of their money on improving their quality of life. What made them switch to their current budget-conscious lifestyle?
 
The most immediate factor may be the lingering shadow of the epidemic over the past year. The sudden outbreak, and the long isolation that followed, kept young people at home, unable to work and without income. Savings became a lifeline, a source of comfort for those in distress. Even if the epidemic goes away, the idea that life is uncertain will not, which may compel young people to get their finances in order and save up for the next storm.
 
A longer-term reason is that the young generation is finding that it truly lacks money. On the one hand, those born in 1990 or 1995 missed the reform and opening of the 1980s and the rapid economic growth of the 1990s. For those just getting out of school, they don’t have the capital to start a business, creating something of their own in a brutally competitive marketplace 一片红海.  The most common way to accumulate wealth is to get hired by an enterprise and earn a salary.
 
In the past, when young people started a family or a business, they could still rely on their parents to get them on their feet, but now they are also faced with soaring housing prices. Greater job opportunities have attracted young people to first - and second-tier cities, but families in third - and fourth-tier cities cannot afford to buy a house in first-tier cities even if they empty their accounts. And how long will young people have to wait to buy a home on their own fixed salary? According to the data from DT finance, considering the city's average disposable income and the average price of second-hand homes, it would take 115 years to buy an 80-square-meter, two-bedroom apartment in Shenzhen, the country's most expensive city, and 71 years, 68 years and 65 years, respectively, to buy a home in Beijing, Xiamen, and Shanghai.
 
Wages no longer provide security and satisfaction, so investing becomes a way out. Although experienced investors consistently stress that long-term investments are the sole way to make money, and people should only put extra money in risky investments, some people still bet the farm on every possible opportunity, hoping to win the lottery and strike it big.  In interviews with Tencent News Guyu Lab, fund holders repeatedly insisted that "life hasn’t left me many choices."

At the same time, social networking apps allow young people to get together and share with each other, which may be helpful but also becomes a form of peer pressure. Maybe you used to only have friends with the same income and similar situations, and you could comfort yourself that if you work hard and stay patient, you can achieve your ideal life one day. However, now when you open your mobile phone, you can see everywhere that "your peers are leaving you behind." While in reality, those who buy cars and houses and achieve their financial freedom through investment are a minority, the Internet shows you this small number of successes all at the same time, forcing you to invest, get your finances in order, get money, and keep working.
 
The Desire for Wealth is not Due to the Love of Money
 
While struggling to get money, these young people seem to know better than anyone that money can only be a tool, not an goal.
 
In the introduction to the "Women's Financial Investment Group" on Douban, the group leader quotes a sentence from the American investor Charlie Munger (b. 1924):  "At a certain point in my life, I decided I wanted to be rich. This is not for the love of money, but for the pursuit of a sense of independence. I like being able to speak my mind freely and not be governed by someone else's will."
 
For some young people, the pursuit of wealth may not be for luxury cars or fancy food and drink, but for the independence, freedom, autonomy, and self-sufficiency it brings. The obsession with financial management and saving is not only due to the anxiety brought about by the uncertainty of contemporary life, but also due to the dissatisfaction with the high intensity and fast pace of life as a cog in the machine.
 
Thus in 2020, we hear the story of Guo Yu, a 28-year-old retired programmer.  Guo, who originally studied public administration, changed majors and learned coding on his own. He became a programmer after graduation and accumulated a certain amount of wealth by working in several Internet companies. In an interview with People, he repeatedly mentioned that because of his poor family background, he had "no choice" throughout his childhood, meaning that he could not choose to refuse to change schools or choose to become a professional writer. But after accumulating wealth, he felt free to choose, and he quit his current job, moved to Japan to run a spa hotel, and started writing again in his spare time. "A series of good fortune has brought me to the beginning of my life again, only this time I have the freedom to choose," he said.
 
Guo Yu is not alone. This lifestyle of "financial independence, retire early" lifestyle ("FIRE" for short) has become a trend for the new generation.  In the United States, the movement's core tenet is "reduce material desires and live a minimalist life." But in China, young people are taking the approach of simplifying their living conditions and adding to their assets, what we talked about earlier as "increased income and reduce spending.”
 
And this kind of "retirement" does not mean giving up work completely and "eat bon-bons until you die," but to summon up the courage to quit the rat race, to quit jobs that are meaningless and only rob you of your life energy, choosing instead careers you really love and devoting yourself to them. This career may not have a regular, high-paying salary, but with the security of financial savings, young people will have no regrets.
 
Nomadland, which won the Golden Globe for best film this year, has helped more Chinese audiences understand the nomadic lifestyle. The film's protagonist, Finn, who is over 60, lost her husband, job, and her home due to the financial crisis. She converted a van into a home, loaded up all her belongings, and started taking part-time jobs while traveling around the United States. Although life is hard, it is also full of the joy of being close to nature and the surprise of meeting strangers.
 
A few passages from the film cast doubt our conventional approach to work: "We have not only accepted the tyranny of the market, we even have embraced it and lived our lives in its chains. We are like packhorses that happily work themselves to death and are finally banished to the plains..." So, this group of people chooses to give up "the packhorse life” and returns to nature to find a way of life they can more easily control.
 
The film was adapted from award-winning American journalist Jessica Boulder's novel of the same name, and today, tens of thousands of people in the United States live this nomadic life.
 
For young people, the development of the Internet and the diversification of work forms have opened up more possibilities for their own nomadic life. Designers, writers, and photographers are not tied to a particular workplace or limited to a specific city. They can work at any time with a computer and an Internet cable. This is where the Digital Nomad comes in. These nomads can either move from one place to another to explore the world or depend on themselves and create value. Life is no longer a small world in an office building of reinforced concrete.
 
It has been claimed that financial freedom is a false proposition because people's desires are insatiable and can only rise with their incomes. But for this generation of young people, financial freedom is an attainable goal that can be determined according to their own personal needs. It is not life’s end point, but instead the starting point of a new life, after which life opens up infinite possibilities.
 
Notes

[1] 肖舒妍, “从“跑步买基”到“聚众抠门”，这届年轻人为什么执着于“搞钱”?” published online on March 19, 2021.
 
[2] This is an untranslatable pun on two slang uses of the word “green 绿,” which, in the first instance refers your partner leaving you for someone else (“you got greened 你被绿了”), and in the second, refers to the fact that on mutual fund apps in China, losses appear in the color green.  There are many similar jokes, see for example https://zhuanlan.zhihu.com/p/354317299.  As we will see below, profits appear in the color red on the app.

[3] Translator’s note:  Lufax is the Shanghai Lujiazui International Financial Assets Exchange Company, a financial assets trading information service platform approved by the State Council.

[4] Translator’s note:  Maimai is a social networking platform, a self-described "networking engine" that claims to help professionals to grow their networks, communication, and job recruitment.

[5] Douban, a community website, offers a variety of services, including book, video, and audio recommendations, suggestions for offline activities, and group topic exchanges.

[6] Translator’s note:  This is yet another pun. Yueguang月光literally means “moonlight,” and has the same romantic or poetic connotations in Chinese as in English.  But here it means that by the end of the month月, my wallet, or my bank account, is empty光.