From the very beginning, the primary function of A-shares was not to provide long-term returns for investors, but to serve as a financing channel for enterprises, especially state-owned enterprises. This positioning has never changed in over thirty years.

Why is it almost impossible to do real value investing in A-shares?

In 2003, Warren Buffett spent about $500 million to buy PetroChina's Hong Kong shares. At that time, the company was undervalued, had high dividends, and stable cash flow, making it a typical value play. He didn't do any complex operations, just waited patiently. Four years later, in 2007, Buffett started selling in batches from July and completely exited by October, turning $500 million into around $4 billion—an eightfold return. This was a textbook example of value investing: buy low, wait for value to return, and sell high.

But the most interesting part is that in the same year Buffett exited, PetroChina's A-shares were listed. On the first day of listing, the opening price was 48.6 yuan, three times the IPO price. The stock price then fell continuously, hitting a low of just over 4 yuan more than a decade later. If someone bought at the IPO price and held until now, they would have lost over 90%. The same company, at the same time, made Buffett a sevenfold profit in Hong Kong, while retail investors in A-shares lost 90%. And this wasn't some junk company—it was China's largest oil enterprise. So where did things go wrong?

Many people's first reaction is that buying at 48 yuan was too expensive, which is true, but that's just the conclusion. The real question is: why was PetroChina priced at 48 yuan? Who set that price? Was it the retail investors buying in? If you actually look at the data, retail investors do account for over 90% of A-share accounts. But in terms of market capitalization held, retail investors only account for 30%, with the remaining 70% held by institutions, legal entities, and foreign capital. In other words, retail investors never had real pricing power.

Even institutions themselves find it hard to do real value investing in A-shares. Take mutual funds as an example: fund managers are usually evaluated on a one-year or even shorter cycle. If their performance ranks low this year, they might be out of a job next year. Value investing takes time to validate, often requiring two to three years or more. If the value doesn't return in the first year, the manager might already be gone. So chasing trends, trading in waves, and focusing on short-term performance become the most rational choices. It's not that they don't understand value investing—it's that no one dares to wait.

From the very beginning, the primary function of A-shares was not to provide long-term returns for investors, but to serve as a financing channel for enterprises, especially state-owned enterprises. This positioning has never changed in over thirty years. So for ordinary people, the options are either to stay away or to stop kidding themselves about being value investors. The most dangerous state is buying in as a speculator but then using fundamentals and value investing to console yourself after getting trapped. Because those who bought PetroChina at 48 yuan in 2007 probably genuinely believed they were doing value investing, but they overlooked one thing: price and value are never the same, especially in A-shares.