Quiz: Name the Asia-Pacific economy which had already become crazy about stocks, shares and capitalism way back in the 1920s. Hint: most of you are reading this newspaper in the very country in question. If you said Hong Kong, go and stand in the corner. Wrong! The correct answer is China. There were more than 150 stock markets in the Celestial Kingdom in the 1920s. The biggest was in Shanghai and opened in 1919. The buzzing, cosmopolitan city was a thriving centre of commerce while Hong Kong was a small dockside town in the south. The concept of trading in stocks was introduced to China at the time of World War I by Dr Sun Yat-sen , known as 'the Father of Modern China'. (Dr Sun, incidentally, went to school in Hollywood Road in Hong Kong.) China was hooked on capitalism until the 1930s, and was on course to becoming a modern, wealthy country. However, the Communist Party under Mao Zedong introduced a series of disastrous financial and economic policies, which included closing down all stock markets. The country was impoverished. Down south, the little harbour town flourished. In Hong Kong, share trading of sorts had been taking place since the 1860s. (The concept of buying a tiny piece of ownership of a company, in exchange for a share of the profits, had been first popularised by travelling merchants in Europe in 1720.) But the huge, world-scale stock market that we have in Hong Kong today is a remarkably recent invention. The Stock Exchange of Hong Kong, believe it or not, is only 12 years old, having been founded on April 2, 1986. It had a great many smaller predecessors. A tiny stock market was set up by Europeans in Hong Kong in 1891, and formalised as the Hong Kong Stock Exchange in 1914. A second exchange, the Hong Kong Sharebrokers' Association was founded in 1921, and the two merged in 1947. Share trading remained almost entirely a European business run by this one small group until 1969. Chinese people felt excluded. So a group of locals, led by one Ronald Li, set up the Far East Exchange in 1969. Local Cantonese-speakers flocked to buy shares and the entire community went equities mad. Until this time, the Hong Kong share market as a whole was smaller than that of Manila, which was then a prosperous city. (It is likely that there would have been Cantonese amahs working as domestic helpers for Filipinos of Chinese descent in the Philippines - think about that!). In the early 1970s, all of Hong Kong's communities - every Wong, Dick and Hari - were hooked on the Hang Seng Index. You could sell shares in anything in those days. One prospectus offered the public the 'opportunity' to buy shares in the wisdom of a group of Chinese businessmen who would meet once a week to discuss what to buy or sell. The third and fourth stock exchanges to appear were the Kam Ngan Exchange in 1971 and the Kowloon Exchange in 1972. When a fifth was proposed in 1973, the Government called a halt. Good thing too. There was a huge crash at the end of 1973 and people lost their life savings. The Hang Seng Index fell from a 1973 high of 1,775 to a 1974 low of 150. It recovered later in the 1970s, largely because of the success of a small number of massive stocks. In the mid-1980s, one single company accounted for 10 per cent of the entire value of the market - Hongkong Bank. In 1986, the Government reorganised the industry so that there was just one Hong Kong stock exchange, and placed as its head Ronald Li (later jailed for financial irregularities). From the 1980s until now, the Hong Kong share market has grown to be the nineth largest territorial stock market in the world - the biggest in Asia outside Japan. Share investors have to have nerves of steel. Investors have seen their savings double in a day - and then turn into a debt 10 times the size of their initial investment. Meanwhile, some interesting things have been happening to the north. A tiny share market was started in Shenzhen in the late 1980s. It had its moments of popularity. One investor certainly made a killing there - he shot his broker. It was not a uniform success. In one embarrassing day in April, 1990, the Shenzhen share market registered an unprecedented turnover of zero renminbi. Not a single fen of stock was traded. In September 1986, a tiny share exchange, listing just two stocks, opened in Shanghai, operating from the offices of a bank. The authorities insisted on controlling the prices of the two stocks, showing that they had missed the whole point. But this is the scary bit. Our cousins in the mainland are learning the game extremely quickly. In December last year, the Shanghai Stock Exchange turned over US$29 billion worth of business (about HK$224 billion). Hong Kong, in comparison, did only US$22 billion worth of business. China is back in the game.