When it comes to China, there's always a catch

AS China's once-staid currency suddenly dropped sharply last week, Wall Street began sniffing around for a way to profit. A trader on Goldman Sachs' Hong Kong trading desk sent out a memo to hedge fund clients highlighting one opportunity: Taking advantage of a price difference between China's onshore renminbi and its offshore version. The currency is not freely tradeable, and it was trading in Hong Kong as much as 1.5 per cent lower than in China.

That is "assuming you can move money between Hong Kong and the mainland", the trader wrote, referring to China's capital controls. "Good luck," he signed off. In China, there is always a catch, something that even some of the world's smartest investors are just starting to learn.

The high-flying economy was destined for high-octane growth for years. Until China's leaders revised their growth target. The bull run was heralded as a new golden age of stocks by the state media. Until it hit a free fall that erased over US$3 trillion in market value, volatility that still continues.