Before the start of the National Day holiday in China, Beijing unexpectedly rolled out a series of monetary and fiscal policies, aiming to rescue the crisis-ridden stock and property markets. Stocks in Shanghai and Shenzhen surged sharply, with the soaring index resembling a sharp blade hovering over eager investors rushing in. Experts believe that the Chinese stock market has entered a frenzy, with the real manipulator being the Chinese Communist Party. Despite the clear enormous risks, a large number of retail investors in China are still eagerly entering the market, indicating that if the market turns downwards, Chinese society could face even greater crises.
Independent TV producer Li Jun expressed on New Tang Dynasty TV’s “Elite Forum” program that the public in mainland China had mixed reactions to the recent surges in the Chinese stock market. While some people are observing from a distance, many others are full of anticipation. Observers include individuals from the economic and business sectors. During the market surge, 146 listed companies’ shareholders rushed to cash out. Some business owners are refraining from investing or expanding, holding onto cash and refraining from buying property, indicating their awareness of China’s current bleak economic situation. On the other hand, some individuals, mainly retirees and those less knowledgeable in economics, are eager to try their luck in the stock market post the National Day holiday.
The hot topic of discussion currently revolves around how much further the stock market can rise. The Chinese stock market is entirely policy-driven and controlled by the government. While the government has the capability to push the stock market to 3000, 4000, or even 5000 points, the critical point lies in when a large number of retail investors enter, signaling a swift downturn. Learning from past cycles of being taken advantage of, many Chinese stock market participants are still expected to enter the market.
The focus now shifts to new stock market participants, despite previous reports suggesting that ordinary people in China are not suitable for stock market investments. The current state of the stock market echoes a line from Qian Zhongshu’s novel “Fortress Besieged”: “Those inside the city want to break out, while those outside want to break in.” The stock market seems to embody this sentiment.
Shanghai entrepreneur residing in the U.S., Hu Liren, expressed on “Elite Forum” that the current state of the Chinese stock market is insanely speculative, devoid of economic logic. While traditional stock markets in the West gradually rise in alignment with economic fluctuations, the Chinese stock market exhibits extreme volatility – surging and plunging without warning. The current context has also seen a shift where discussions on the market are dominated by small, retail investors, rather than financial experts. This shift indicates a concerning trend in the market’s landscape where the opinions of professional institutions are bypassed.
Hu highlighted that the Chinese Communist Party’s control over the stock market is evident, as the recent policies and interventions demonstrate. This translates to a market where information asymmetry is prevalent, benefiting those with advanced, insider information. Therefore, for individuals whose information lags behind, profitability in the stock market becomes significantly challenging.
Hu further emphasized that with China’s economic and trade volume decline, and increasing de-Chinafication trends globally, the outlook for the Chinese economy, finance, and market remains pessimistic. The inflated stock market and government interventions only add to the frenzy and do not address the underlying structural issues.
The recent market-saving policies introduced by Beijing stand in stark contrast to the emphasis on prudent fiscal and monetary policies highlighted in a previous meeting. The sudden shift in policy direction has raised significant interest among political observers, with the recent interventions contradicting the earlier stabilization-oriented stance. These reactive measures potentially jeopardize economic stability and exacerbate control over the market.
Overall, the evolving situation in the Chinese stock market reflects a turbulent and precarious environment, with government interventions steering the course and the future trajectory appearing uncertain. The mismatch between policy directions and market realities underscores the challenges and risks inherent in the current economic landscape in China.