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2015年7月11日 (土)

中国株乱高下 強引な市場介入が招いた混迷

The Yomiuri Shimbun
Heavy-handed intervention behind turmoil roiling Chinese stock markets
中国株乱高下 強引な市場介入が招いた混迷

Recent events have reinforced just how difficult it is to steer the Chinese economy through the slowdown it is facing.

Chinese stock prices are continuing their wild fluctuations.

The Shanghai Stock Exchange Composite Index, China’s leading stock index, surged from the latter half of 2014. In June this year, the index reached about 2½ times its level a year earlier. However, after the index peaked, the market was swamped by a mood of selling. The Shanghai index has plunged as much as 30 percent in the past month.

The panic on the Chinese stock market is having repercussions in markets around the globe. The Nikkei Stock Average in Tokyo has dipped below 20,000.

On Thursday, prices on the Shanghai exchange regained some ground as expectations rose regarding steps taken by Chinese authorities to push up share prices. However, doubts linger over the staying power of these measures. Investors will need to exercise caution over volatile share price movements for a while yet.

It should be recognized that the chaos on the Chinese stock market was brought about by failed policies of the authorities.

In an attempt to shore up the economy, which was losing steam due to the deterioration of real estate market conditions and other factors, China launched a string of policies to nudge up share prices and stimulate private consumption. The appetite to invest was whetted as interest rates were lowered several times and state-run media carried predictions that share prices would continue to rise.

The authorities bear a heavy responsibility for creating a “government-manufactured bubble” to prime the economic pump.

Hurt by short-term view

As the downward trend in share prices gathered strength, Chinese authorities rolled out a slew of policies for propping up stock prices, with little regard to how these actions might appear to the public. Major securities companies were even ordered to buy about ¥2.4 trillion of exchange-traded funds.

This spur-of-the-moment market intervention by the authorities has undeniably laid bare the peculiarities of the Chinese stock market.

The immaturity of the Chinese market has also added to the confusion.

Because the participation of overseas investors is restricted in the Chinese markets, about 80 percent of all transactions are conducted by individual domestic investors.

These individual investors have soared in number since the market began rising last year. They strongly tend to make buy and sell decisions based on short-term price movements and other data, and observers have said this is one reason share prices make such sudden, sweeping changes in direction.

One peculiar element of the Chinese market is the system that allows a company to decide to suspend trading of its shares. There are numerous problems with hampering the free purchase and sale of shares due to the circumstances of a given company.

China is seeking to switch from a model of high economic growth centered on development investment, to a “new normal” that will allow a soft landing through stable growth driven by consumption.

However, Beijing has been unable to put the brakes on the slowdown in economic growth. The Chinese government has again started steps to prop up the economy through investment, including its decision to establish a new ¥6 trillion fund to be used for investment in infrastructure development.

Shifting to policies that could generate a new bubble will inhibit China’s mid- and long-term growth. This aberration in the world’s second-largest economic power must not be allowed to develop into a situation that shakes the global economy.

(From The Yomiuri Shimbun, July 10, 2015)


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