Panicked Chinese Government Imposes Desperate Measures to “Aggressively” Rescue a Lot More Than Just Crashing Stocks
Stock-market rescue measures, concocted by the government, have been hailing down for days, including an interest rate cut by the People’s Bank of China a week ago. But the collapse proceeded with brutal relentlessness. So now, Premier Li Keqiang pulled out all stops and the State Council is calling the shots in the market, the craziest, most desperate shots.
From July 4 last year through June 12 this year, the Shanghai Stock Exchange (SSE) soared 150%. It was the era when stocks would create unlimited wealth out of nothing in no time, when all comers, from street vendors to farmers, would get their government-promoted chance to get rich quick.
“When our national economy is in its worst shape in more than a decade and many corporates have run into trouble, our stock market suddenly shot up to make everybody happy,” George Chen, Managing Editor for the International Edition of the South China Morning Post, wrote in mid-April. He described the phenomenon this way:
The bulls can always find reasons to defend why the market was up, but I rarely heard anyone explaining the disconnect between the weak real economy and the so-called bull run.
Even the state media probably got over-excited. One Chinese newspaper commentary tried to name the surprising market performance as the latest achievement of President Xi Jinping because the top leadership in the country wanted to “create a new opportunity for wealth redistribution for everyone” to narrow the income gap. Redistribute wealth through the stock market in a socialist country like China? Sounds an exciting new economic theory.
He must have caught some flak from the bulls at the time.
Then came June 13. In the three weeks since, the SSE plunged nearly 30%, including 5.8% on Friday, wiping out nearly $3 trillion in get-rich-quick riches, despite the efforts undertaken by the government and the PBOC to put a stop to it.
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