Ásia-Pacífico Economia Internacional Política Internacional

The Dust has Not Yet Settled in Chinese Stock Market, by Chen Huaqiao

A crise e as contradições do mercado de ações da China

The History

In 1891, there was a stock market in Shanghai already. Under the policy of reform and opening-up put forward by Deng Xiaoping, the stock exchange was set up respectively in Shenzhen and Shanghai in 1990. The establishment of the stock market was intended to develop socialist market economy with the feasible capitalist approach in China. Hence, the stock market is a barometer of China’s economic development.

According to the statistics, the total market capitalization of China’s stock market was 37000 billion RMB and its ratio on GDP was 58% by 2014, the counterpart of American was 125% by 2013. Wherefore, compared with the developed market, the influence of stock market on economy is relatively small, and at the same time, the stock market is currently thriving in China.

The Role of SSE

Based on the statistics of Shanghai Stock Exchange(SSE), there are 1071 listed companies and 4584 listed securities. And the total market capitalization and total free-float capitalization have already reached 320705640 and 277368430 million RMB individually. SSE is regarded as the fourth stock market in the world in the latest report of World Federation of Exchanges in April 2015.

SSE contains stock, fund, bond and derivative. The main indexes are listed as SSE Composite, SSE 380, SSE 180, SSE 150, SSE 100, SSE 50 and etc. Undoubtedly, the serial of SSE index is the weathercock to demonstrate China’s economy.

The Recent Disturbance

For the past few weeks, SSE has been going through up and down like a roller coaster. SSE composite index was varied sharply within short days, whereas, the total value of the market was devalued greatly. This has caused wide attention among different fields both at home and aboard.

Some Explanations on the Oscillation

The current disturbance of China’s stock market has raised hot discussions around the world since its beginning. Based on a full demonstration, some outsiders believe that it was barely a reflection of the die-hard problems faced by China’s real economy. Ironically, the conspiracy theorists would rather take it as an economic game of the re-balance of the anti-corruption movement in political atmosphere for the last two years.  While a lot of economists interpret it as a normal speculation for the profit by the lucrative international capital. However, it was still earlier to get a final conclusion barely based on the current remarks.

The Reactions of Chinese Government

After some hesitation, a comprehensive but quite new method was employed by Chinese government which was deal with this unprecedented challenge. Apart from economic initiatives launched by the Ministry of Finance, State-owned Assets Supervision and Administration Commission of the State Council, China Insurance Regulatory Commission, China Banking Regulatory Commission, the People’s Bank of China since 8 July, the Ministry of Public Security also joined together with China Banking Regulatory Commission to investigate the would-be existed manipulations behind those unusual transactions on 9 July, which is initiative in China. Surprisingly, two deputy ministers from the Ministry of Public Security, one of them was promoted only thirteen days, who has been fighting against the economic crime for thirty five years. They were both appointed to be the leader which was reported by the Xinhua News Agency with a high-profile announcement. This is the first time in the past twenty-five years histories of China’s stock market.

Meanwhile, 110 state-owned large enterprises, covering the main fields of Chinese economy, posted a commitment to maintain the stability of capital market on July 8, which was highly regarded as another way for Chinese government to revive the stock market by the suspicious. Therefore, this crisis is a small window for the observer to look at economic regulations of Chinese government, which is different from the other countries.

The Rescue Operation

Apart from the official actions, the multiple social medias in China, such as QQ, Weixin, Weibo, were activated by this issue as well. The internet users even forwarded some initiatives among their friends which call on the fellow citizens to defend the invasion of the evil international capitals, and voluntarily launched a movement which named as Great Patriotic War to hold the financial territory.

The dust has not yet settled in Chinese stock market. The relevant aspects are watching and wait for the right moment. Perhaps, China’s dama, given by Wall Street Journal (Elderly ladies), who raised on the storm of international gold fever once upon a time, may be the Savior of the swing this time, Who knows?

Chen Huaqiao, Associate Professor, School of International Relations, Sichuan International Studies University, Chongqing, China.

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