After the conclusion of the Third Plenum of the Chinese Communist Party, the stock market has once again been in a continuous slump. Chinese-American economist Chen Zhiwu recently stated that mainland China is returning to a planned economy, and he suggested shutting down the A-share market, no longer pretending to maintain a “capital market that is unlike any other.” This statement has sparked a heated discussion.
During the past trading week (July 22-26), A-shares continued to decline, with the Shanghai Composite Index falling below 2900 points. On July 26th, the China Securities Regulatory Commission announced on its website that the Chairman of the Commission had held discussions with several foreign financial institutions in China, stating the need to “deepen reform and opening up.”
In recent days, there has been a viral spread online of Chen Zhiwu’s speech regarding the suggestion to “shut down the A-share market” (video link).
Chen Zhiwu expressed his advocacy for closing the A-share market, citing the return to state control and resource management in various aspects. Since the government is already re-regulating the economy, he believes it would be better not to waste so many resources, especially because “many leaders do not like financial professionals receiving such high salaries,” forcing them to switch to other roles instead and not pretend to operate a market that is unlike any other.
Chen Zhiwu mentioned that when he shared these ideas with “certain former leaders” last year, “they were shocked.” He expressed that after decades of striving to promote the development of the Chinese financial market, he now realizes that they are “suddenly back in the era of Zhu Yuanzhang,” suggesting that under the current circumstances, it may be better to shelve the A-share market.
It is understood that Chen Zhiwu attended the “2024 China and Global Economic Forum – China’s Strength and a New Chapter in the Global Economy: Development and Outlook,” organized by the China Economic Research Institute at the University of Hong Kong on July 20. During the forum, he shared his viewpoints in a dialogue with Wu Xiaoqiu, the Director of the National Finance Research Institute at Renmin University of China.
Chen Zhiwu’s remarks elicited laughter from the audience at the event.
The current downturn in the Chinese and Hong Kong stock markets has led to frequent losses for individual investors, with a prevailing sense of disappointment among stock market participants. Chen Zhiwu’s suggestion to “shut down the A-share market” has resonated within the Chinese investor community. However, as of now, posts related to this speech have been deleted on platforms like Weibo and NetEase, existing only in isolated screenshots or quoted by authors.
On X platform, a social media platform overseas, many netizens are discussing:
“Under the rule of the Chinese Communist Party, even the advice of an economist is being censored. Chen Zhiwu’s candid remarks reflect the issues in the A-share market, yet such truths have become taboo. This practice is the biggest irony in the slogan of ‘openness and transparency.'”
“Professor Chen Zhiwu’s words can be considered a quintessential example of ‘black humor.'”
“If it’s shut down, how can they continue to exploit the investors? They need to maintain a market that is unlike any other, neither truly planned nor fully market-oriented, so that the CCP can continue to extract profits smoothly and comfortably.”
“Deng Xiaoping once said, ‘It’s fine to have a stock market, but if it’s not good, it can be shut down.’ Now, his prophecy has come true. It really can be shut down.”
Public records show that Chen Zhiwu was born in Hunan, China, and after completing his university studies, he went to the United States for further education. He previously served as a finance professor at the Yale School of Management and is currently employed at the School of Economics and Management at the University of Hong Kong.
As early as 2014, Chen Zhiwu publicly stated that the probability of a real estate bubble bursting in China in the next 10 years is at least 99%, advising those heavily invested in real estate to divest as soon as possible. He also pointed out the risks in the A-share market, ranking it as the top among several major stock markets, advocating for diversified investments.
The Shanghai Composite Index has repeatedly dropped below 3000 points this year, with individual investors being repeatedly harvested. Shortly after the conclusion of the Fourth Plenum of the 20th Central Committee of the Chinese Communist Party, which claimed to “deepen reforms,” the stock market plunged below 2900 points within a week.
From July 22nd to 25th, China’s central bank lowered interest rates twice within three days to inject liquidity into the market, but the market’s response to these measures has been lackluster.
On July 26, American economist Huang Dawei told Epoch Times that the current overall Chinese economy, whether in exports, domestic demand, or investment activities, significantly deviates from expectations. The central bank has had to release a certain amount of liquidity through rate cuts to manage the situation, but the deep-rooted problems in the Chinese economy cannot be addressed solely by lowering interest rates.
Independent commentator Cai Shenkun stated on the “Elite Forum” on July 27 that the Chinese stock market itself is abnormal and cannot be assessed using the rules of international capital markets. From the beginning, the Chinese stock market was not intended to serve stock investors but to assist state-owned enterprises in overcoming poverty and difficulties, with financing mainly aimed at revitalizing capital markets to solve widespread problems among state-owned enterprises. Many companies could go public with just an index, using packaging and asset substitutions with no accountability to stock investors.
Cai Shenkun expressed that the current bleak state of the stock market aligns with the current state of the Chinese economy. The main issue is that China’s economy is in an extremely poor condition, with both the stock market and investors feeling hopeless, even on the brink of collapse. Despite the implementation of numerous so-called market-saving policies, there has been no sign of improvement so far.