(James Saft is a Reuters columnist. The opinions expressed are his own)
By James Saft
Sept 1 (Reuters) - The arrests and "confessions" will continue, it seems, until Chinese stock market morale improves.
China's efforts, not just to manipulate its stock market higher, but to squelch information and intimidate those it sees as threats to its purpose should also scare global investors.
The spectacle of Wang Xiaolu, reporter at a Chinese business publication, enacting Monday what authorities called a confession of spreading "panic and disorder" in the stock market through his reporting should scare investors.
The announcement Sunday by China's Ministry of Public Security that 197 people had been punished for spreading rumors about stocks and other issues should scare investors.
That the head of hedge fund manager Man Group Plc's China unit has been taken into custody, as reported by Bloomberg on Monday, should scare global investors.
This is a practical, not a principled, argument. Some might say that it is wrong to support with your money a regime with a lack of respect for human rights and the rule of law. Wrong perhaps, but as a stock investor foolish definitely.
All of these actions by China are confessions not of strength but of vulnerability, the kind of vulnerability which requires a much higher risk premium than Chinese securities are currently offering. The exact nature and mechanism of China's vulnerability to a falling or volatile market we can't know from outside, only that it is big enough to spark what are likely self-defeating actions.
All of this puts me in mind of comments by risk analyst Nassim Nicholas Taleb on Monday that the best way to get to know people is by discovering what they lie about.
"Corollary: To figure out with some precision what will bankrupt a firm, find out what they tend to lie about (or exaggerate) the most," Taleb said via Twitter.
The same, roughly, holds true, I'd venture, about countries and what they suppress. To know what threatens them, and by extension those who commit their capital to them, examine what they suppress.
Even putting aside conclusions about the accuracy of Xiaolu's reporting, or the good conduct of those "assisting" authorities with their enquiries, we can note that journalists and market participants weren't being arrested and paraded bleary-eyed before cameras when the Chinese stock market was staging its vertiginous rise.
SELF-DEFEATING
Only when it fell, rapidly, did Chinese authorities begin their campaign, and the common denominator appears to be that those who provide information suggesting that it may fall will be taken firmly in hand.