Beijing says it will intervene 'when necessary' to stabilize China's …
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A commentary in the Communist Party’s flagship publication yesterday suggests the mainland government is prepared to intervene in the stock market again if turbulence returns.
The article in People’s Daily, which says that maintaining financial stability should be a top priority, is the latest piece by state media to reaffirm Beijing’s intervention to stabilize the stock market, amid mounting pressure on authorities to prepare an exit strategy.
It said the finance sector was the lifeline of the national economy and warned that instability would jeopardize years of market reform.
“When abnormal volatility and irregularities arise, we must be resolute in taking action and measures when necessary, without hesitation,” the commentary said. “Genuine financial stability must be a proactive, long-term and sustainable stability – not a passive, short-lived and unsustainable stability.”
On Monday the paper said intervention in the stock market was an “international norm”.
“It was obviously a morale-boosting article aimed at soothing investors’ concerns about the market outlook,” said Haitong Securities analyst Zhang Qi. “But a boom-to-bust cycle is unlikely to happen in the coming three or four months.”
The commentary also dismissed calls for the pace of market reforms in the financial sector to slow, arguing more change was needed for stability.
The A-share market has been on a roller-coaster ride since June 15, with stock markets dipping more than 30 per cent in three weeks, wiping out US$3 trillion of market value.
Beijing stepped in to stem the market crash as regulators suspended new share offerings and ordered major shareholders not to sell stock but to increase their holdings.
The central bank also injected liquidity into the China Securities Finance Corporation, which distributed cash to mutual funds to buy shares.
It was estimated that the rescue efforts had cost more than US$161 billion of capital, though it remained unclear how and when the regulators would work out a plan to withdraw the funds.
Lin Zuoming, chairman of the Aviation Industry Corporation of China, said recently that the market crash was the result of a scheme by hostile foreign investors to undermine the country’s reforms and overthrow the party.
On Monday, financial news outlet Caijing said regulators were studying how to withdraw the rescue funds, but the China Securities Regulatory Commission denied the report.
The market rout happened after the benchmark indicator surged 120 per cent from October 2014, buoyed by an influx of speculative capital.
State-owned media such as Xinhua were blamed by millions of retail investors for publishing upbeat articles in late April, encouraging them to chase the rally amid the country’s deepening economic reforms.
Levin Zhu Yunlai, son of former premier Zhu Rongji and former chief of China International Capital Corporation, this week criticized some of the stabilization measures. He said regulators should come up with a more systemic approach.
Read the original article on South China Morning Post. Enjoy the full SCMP experience here: click here to get your subscription offer with US$38 gift voucher. Copyright 2015. Follow South China Morning Post on Twitter.
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Beijing says it will intervene 'when necessary' to stabilize China's …
