Despite the bullish talk, Wall Street has China reservations

, with a bit of luck, can make a spectacular return by betting on a coin flip. Yet they risk losing everything in the process. The ultimate outcome for investors is a high return adjusted for the risk associated with it, an idea most famously captured by the “Sharpe ratio”. This divides the expected return of an asset, minus the risk-free rate that an investor could earn by parking their money in super-safe government bonds, by its standard deviation, a measure of the return’s volatility. A ratio above one is considered good. The Sharpe ratio of a double-or-nothing coin flip is negative. These sorts of calculations are on the minds of Western financiers who have made, or plan to make, investments in China. Over the past three years risks associated with the country have piled up. Power seems more concentrated than ever in the hands of Xi Jinping, China’s leader. His attitude to business is capricious: he has kneecapped tech firms including Alibaba and Tencent; Ant Group, an affiliate of Alibaba, was forced to call off its American public offering in 2020. A string of top executives have vanished. The most recent disappearance is that of Bao Fan, boss of China Renaissance Holdings, who was reported missing on February 17th. The investment bank’s shares plunged by 50%, before recovering a little.