WANG JIAYI is one of China's new millionaires.
An engineer and scientist, Mr. Wang plunged into stock trading shortly after the Shanghai Stock Exchange, the country's first securities market, opened in 1990.
Since then, he spends his days in the so-called millionaires' rooms at the Shanghai Wanfang Investment Consulting Company, huddled over a computer screen charting his investments, which have earned him $600,000 in 1993 alone.
``Compared to stock markets in other countries, the Chinese market is still naive. The Shanghai stock market is still risky, but the initial investors have made a lot of money,'' says Mr. Wang, whose $300 investment in his first 100 shares of stock three years ago is now worth $85,000.
``If we had stuck to Marxism, there would never have been any leap forward,'' he says.
With China's economy galloping at the world's fastest growth rate and foreign investment pouring in, Shanghai, once China's financial hub, hopes to outpace Hong Kong after the British colony's return to the mainland in 1997.
Since paramount leader Deng Xiaoping unveiled his plan 15 years ago to take Marxist China down the capitalist road, this brassy city where money is king has taken economic center stage. A growing urban economy
According to the State Statistical Bureau, Shanghai now has China's most powerful urban industrial economy.
Accounting for more than one-tenth of China's industrial output, the city saw its gross domestic product grow 14.5 percent in 1992.
With more than 5,300 foreign-funded enterprises and more than 30 newly privatized state enterprises, Shanghai is in the forefront of the market changes that are edging out China's old command economy.
Across the Huangpu River from the stately colonial facade of the famous Bund riverfront are the modern, glass office towers of the Pudong industrial development zone, virtually a second city under construction.
Nanjing Road, the city's main thoroughfare, bustles with China's richest and most avid shoppers.
Higher wages, compared with those of other Chinese cities, and pent-up demand have made Shanghai a booming consumer market.
``The most important sign of China's economic development in the 1990s is that savings have started to come out into the market,'' says a former economic journalist who now runs a consulting company.
He estimates that Chinese bank and personal savings are at almost $200 billion and are growing at an annual rate of $50 billion.
``High-speed growth is not just dependent upon the influx of foreign money,'' he says. ``The maturity of domestic financial capital will eventually speed up China's economic growth.''
Much of that money is now going into the stock and real estate markets in Shanghai, where residents and investors from other provinces are in love with securities trading.
An estimated 1 out of 5 families in this city of 13 million people hold shares in the Shanghai market, securities officials say.
With more than 500 brokerage companies in Shanghai, the stock exchange has almost 5 million account-holders and 480 members, up from only 25 three years ago. The current 2,500 seats, now scattered around four buildings, will almost double when the exchange opens its new high-rise headquarters in Pudong in 1995.
Further advances in the financial infrastructure are taking shape.
The first city in China to reopen a stock market shutdown by the victorious Communists in 1949, Shanghai now plans a gold exchange, financial futures market, a commodities market, and a more liberal climate for foreign banks. New foreign-exchange market
Shanghai is also poised to become the hub of the new national foreign exchange market that was announced earlier this week by the Chinese government. To boost foreign investment and China's chances of winning reentry to the world trading arena under the General Agreements on Tariffs and Trade, the government announced that, effective Jan. 1, China's two-tiered currency system will be merged.
A vestige of communist China xenophobia, the foreign exchange certificate (FEC), which before the announcement was set at 5.8 FEC to the United States dollar, will be phased out and unified with the standard renminbi currency.
The FEC is a de facto tax imposed on all foreign tourists and businessmen, who were required to pay expenses in the FEC rate, while Chinese could use the standard renminbi, set at 8.7 to the US dollar. Foreign businessmen could only repatriate profits at the renminbi rate set by official government swap markets.
China is stopping short of making the renminbi fully convertible and is likely to support an official renminbi rate to prevent wide fluctuations.
Still, Shanghai will become the center of a national system of swap markets linked by computer. Until now, swap markets often operated independently of each other and set widely different exchange rates.
Chinese brokers hope the foreign exchange reform will help reinvigorate the Shanghai market and its sister Shenzhen market, both of which had recently backed off from torrid trading paces last year and earlier this year.
The change will clear the way for merging the complex share-trading system that separates Chinese investors in the so-called A-share market from foreign investors in the so-called B-share market.
``In China, everyone knows that the Shanghai people are more market-wise and pragmatic,'' says Hong Weili, a 23-year-old official who is in charge of merging the stock exchange share system.
``My personal view is that Shanghai is competing. In the not too distant future, we will be able to catch up with Hong Kong,'' Mr. Hong adds. Problems beset a young market
But securities trading in China is still plagued with problems that make it a highly risky venture for Chinese and foreigners. The markets are bedeviled with fraud, accounting sleights-of-hand, and irregular clearing and settlement. Company profit disclosures are uneven, accounting is not standardized, investors question the quality of stock issues, and a strong securities law and regulatory hand have yet to appear, officials, investors, and brokers say.
``A lot of people cheat in the stock market. Oftentimes, investors are friends today and enemies tomorrow,'' says Mr. Wang, the millionaire investor.
``We have problems that most of these more mature Western markets haven't seen for maybe 100 years, maybe 50 years,'' says Gao Xiqing, general counsel of China's Securities Regulatory Commission.
Fraud is a big holdback for Shanghai in its quest to go head-to-head with Hong Kong as China's future financial center.
``We are not confident that Shanghai will be able to catch up with Hong Kong in 10 years, let alone three and a half years,'' broker Cai Wei says. ``The Hong Kong stock market was established a long time ago while the Shanghai market was started just a few years ago. Because of inadequate legislation and regulation, foreigners don't yet recognize Shanghai's market as a valid one.''