China Leaves Small Investors Behind on Road To Capitalism

Analysts say they were overdue for a correction. Despite the fact that the earnings of many companies were weak and corruption was rampant, the Shanghai composite index quadrupled in value from 2002 to 2007.

Briefly in November, PetroChina became the world's first $1 trillion company by some measures of its market value. But by the end of April, shares of PetroChina had plummeted to below its IPO price for the first time.

Andy Xie, a former chief economist for Morgan Stanley Asia Pacific and now an independent analyst, said the challenge for the Chinese public is that "generally speaking, retail investors bought stocks at a high point. They listened to their relatives, friends and heard propaganda.

"When the stocks fall, they are unwilling to sell off and they sit there waiting for the government to save the markets," he said. "This is not rational."

Psychologists across the country say that in recent months they have seen more patients seeking treatment for addiction to gambling.

Li Ning, director of the Psychological Rehabilitation Department at the No. 102 People's Liberation Army Hospital in Changzhou, said that investing in the stock market should be different from gambling but that many "speculate on stocks with a gambling mentality."

He said some patients he has treated are emotionally unstable when it comes to the stock market.

"They cannot stop thinking of recovering their losses," Li said. "They throw all their money into the stock market and stay without rest in front of the computer reading. They hope they can find some positive news or policy but in vain."

Investors like Wang who came in at or close to the market's peak in October have been hit the hardest.

Wang, who had worked in factories in the southern manufacturing city of Dongguan for more than a decade, began investing in the stock market in September. For the first few weeks, it seemed like luck was on his side, and by October the Shanghai composite index had jumped 14.5 percent. The next month, it began its descent. Whatever stock Wang bought, it seemed, began to crash until, by the end of February, his holdings were valued at almost nothing.

Li Huafu, a doctor who treated Wang at the Wujing Zongdui Hospital in Guangdong province, described him as being in shock: "He was very silent, didn't speak much to others."

Li said Wang, who could not be reached for comment, returned with his mother and brother to their hometown in Shandong province. Phone numbers for Wang that were listed in hospital records had been disconnected.

Some investors like Ma Guocheng, 26 and an officer worker, say they have learned their lessons from the recent stock market plunge. In April and May 2007, Ma invested some 270,000 yuan -- about $38,600 at today's exchange rate -- in stocks. By November, those shares were valued at 440,000. He thought about selling, but then he thought they would climb even higher. Now his holdings are worth 50,000, about $7,000.

"I was greedy," Ma admitted. As a consequence, "I lost more than 80 percent of my total investment."

Researchers Wu Meng and Crissie Ding contributed to this report.