A stock market crash there has seen $3.2 trillion wiped from the value of Chinese shares in just three weeks, triggering an emergency response from the government and warnings of “monstrous” public disorder.[…]
In an extraordinary move, the People’s Bank of China has begun lending money to investors to buy shares in the flailing market. The Wall Street Journal reports this “liquidity assistance” will be provided to the regulator-owned China Securities Finance Corp, which will lend the money to brokerages, which will in turn lend to investors.
The dramatic intervention marks the first time funds from the central bank have been directed anywhere other than the banks, signalling serious concern from authorities about the crisis.
More: Over 20% of listed China stocks now in trading halt
Hmmmmm irresponsible lending by central banking again. See a pattern?
“Hmmmmm irresponsible lending by central banking again. See a pattern?”
China’s problems don’t being or end with its central bank. The entire economy is a house of cards largely built off a real estate market that bears no relation to reality. The problem is that the middle class that has been created over the last couple of decades, including all the migrant workers supporting their rural families, wants to see its standard of living continue to rise – that’s the trade-off for tolerating the totalitarian government. The Communists know that if they can’t hold up their end of the bargain the social unrest will begin and, in China, that doesn’t mean voting out the Torys and replacing them with the NDP: it means frog marches into the central square and bullets in heads.
Slaw nails it. Ridiculous real estate evaluations and a wildly overpriced securities market all produced this. Thing is, China has enough capital reserves to stabilize the system, albeit at much lower valuations.
If the stock market is grossly overvalued by fundamental measures then the government trying to prop up stock prices is like trying to turn back the tide. They may be able to create a temporary rally, but fighting gravity is futile.
Only a complete cynic would suggest that keeping “high party officials
and their extended families” whole would be the main function of this
unique rescue mission exercise.
Slaw nails it.
All those Chinese buying house in Vancouver and everywhere else? They want sanctuaries for their families if it all goes bad. Many of them survived the Chinese Cultural Revolution. They do not want to try living through another one again.
Keynes on steroids! All they had to do was to follow the laissez-faire Hong Kong model but oh no, not the Chi Coms.
We have to keep things in perspective when armchair analysing the Chinese market crash. Their stock market was up 100% in the first five months, so is it really surprising that it was due for an adjustment? There were a lot of people making shitloads on the way up and lots losing their shirts now and I’m reasonably certain that they’re not the same people at each end of the pole.
I read in the article that short selling is banned and at zerohedge I glanced in one of the articles that the Chinese government is banning equities managers from selling their distressed holdings. In the west people understand (well, Kate’s readership here do anyway) that an essential element of private property is that the owner can both acquire and dispense of it freely in whatever manner they see fit. Once a Chinese investor becomes aware that he is not able to sell his shares in this free manner then they will know that they have been had and that their equities market isn’t really a market at all. No amount of state support of cash injections will bring back an investor into a market like that. The confidence will be obliterated permanently. Give it some time for the people’s awareness to set in and we will witness the Chinese market implode like nothing this earth has ever seen before. What follows is exactly what slaw said.
I suspect that most companies listed on the Chinese exchange are not what they appear to be either. Anyone remember Sino Forest ? They were probably only the tip of the iceburg. I get the feeling that everyone in China spends all their time trying to dream up new ways cto rip everyone selse off.
China’s EXPORT economy has been shrinking for several years, due to the world’s biggest ‘customer’ (America) having a crappy economy under Oblahblah. Remember Kate’s numerous posts about the plunging Baltic Dry Index? … that’s a LEADING indicator of the dramatically shrinking market for Chinese exports.
So given that, the Chinese government tried to hype their own economy with ‘loose credit’, and all those Chinese borrowers did NOT buy stocks (like investors here) they bought real estate. There’s a big shortage of other ‘investments for China’s new middle class – they don’t believe in ‘paper’ investments anyway(stocks; bonds; mutual funds; etc.)even if they existed there. Culturally, they believe in tangible things, like real estate and productive land, so that’s what they have all been ‘bidding up’ for the past several years.
And forget about China learning anything from Hong Kong – the two China’s (HK, and the ROC/Rest of China) quietly hate each other. Hong Kong is Cantonese and the entire ROC is Mandarin … much stronger dislike than English vs. French in Canada. I recently had a Chinese businessman (from Shanghai) ask me to explain Canada’s English vs. French situation to him after he’d spent a month in Montreal and QC on business. After I explained it he smiled, nodded, and said: “Now I understand – same as in China; we don’t like Cantonese people in Hong Kong, and they don’t like us.”
The Chinese curse (“May you live in interesting times”) is now unfolding, and many smart, wealthy Chinese already have their ‘safety net’ in place in the U.S., Canada, and Australia.
Greece’s problem is merely a flea on the @$$ of an elephant, but China IS an elephant … and when elephants panic ants get trampled! Stay tuned – that metaphorical “famine” Kate keeps wishing for will soon be here. Are we having FUN yet?!
AWW we are hea to poty we flom china we buy vancouva re name it hongcouva ya ya we like white girl round eye big blonde boobies we take pictcha we like fly lice chicken ba spling lol wit sweetn sour sauce and some were da poty at we drink saki maki me hony 35 million Chinese men army we all belly belly hony we need war for abortion baby female we kill for 35 yea kill kill kill we rikey white girl round eye make many babies ya ya. see you soon round eye ha ha we start in hongcouva den we wok east take canada for mao !!!
Now i try to type in captcha drinky saki make my eye go cross not slant i get slant eye fom eat to much fly lice
You are absolutely correct Davers6. Greece is nothing compared to China. Wish we would hurry up and hit bottom so we could start up again.
Out of the west with their money, first came the Japanese, then they left. Next came the Chinese with their money, and now, they are leaving. Is it something we did or said or simply the way of the world?