Chinese Economics Thread

SamuraiBlue

SamuraiBlue

Captain
Here since everyone is just beating around the bushes with someone saying that the little people will not get hurt. Here is an article that discribes what really pulled the triger.

China's stock market crash, explained
China's stock market has been plunging over the past month, and the Chinese government is panicking. Over the past week it has employed a number of extraordinary measures to try to halt the market's slide, to little effect. On Wednesday, the benchmark Shanghai Composite index fell another 5.9 percent, bringing the market's total losses to 32 percent in less than a month.

The question is whether the plunge is just an ordinary correction after a year of big gains, or if it's the first sign of deeper problems in the Chinese economy. Chinese stocks surged last year, but those gains didn't reflect broader economic gains. Rather, they were a result of more and more people investing in the stock market with borrowed funds. That has created instability and a danger that many investors will suffer outsize losses as the market falls.

Investing borrowed money used to be heavily restricted in China, but the authorities have gradually loosened the regulations since 2010. Over the same period, Chinese people found increasingly creative ways to evade these rules. The last month's stock market declines follow efforts by Chinese authorities to rein in this kind of speculative investment. But in the past week the government reversed course and began trying to boost stock prices again.

China's current predicament bears some resemblance to the situation in the United States in 2007. Risky, poorly regulated financial investments have proliferated in China, creating the danger of a meltdown that spreads beyond the stock market to the broader Chinese economy. Yet China's stock market isn't as big, relative to the Chinese economy, as in developed countries, so the panic might not spread to the economy as a whole..... to read more
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I am not pluck anything out of thin air. I have been following it and looking at the mechanism which is written above. The PRC government relaxed various regulations that triggered an artifical rise in the stock market resulting to a stock bubble that had burst. Like I said it is going to spill over to other investment schemes especially the shadow banking system that borrow money directly from individuals placing higher interests then normal banking.
 
Blitzo

Blitzo

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there are many varied claims about the effect of the stock market in the economy... i found this particularly interesting, especially the paragraphs quoted.

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Theories have flourished about why the government has waded in so heavily. The apparent desperation is, some believe, a sign that officials see a looming economic collapse, and are trying to staunch the wound before social upheaval ensues. That story is intriguing, but it is not the most likely.

Lost in all the drama about the stockmarket is that it still plays a surprisingly small role in China. The free-float value of Chinese markets—the amount available for trading—is just about a third of GDP, compared with more than 100% in developed economies. Less than 15% of household financial assets are invested in the stockmarket: which is why soaring shares did little to boost consumption and crashing prices will do little to hurt it. Many stocks were bought on debt, and the unwinding of these loans helps explain why the government has been unable to stop the rout. But this financing is not a systemic risk; it is just about 1.5% of total assets in the banking system.
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Of course one can find any statistics to portray whatever message one wants... but every single bubble or fluctuation in the chinese economy of the last few years has prompted comparisons either with japan or the US and their financial meltdowns or declines... at this point I don't really trust anyone's opinion and the only thing we can do is wait and watch.
 
Equation

Equation

Lieutenant General
manqiangrexue said:
To be honest, I'm no expert on economics. I can read one article that says a certain event is going to lead to economic collapse and read another that says the same event is a routine adjustment and not know which to believe... if it weren't for history. From as far back as I can remember, I have read articles saying China's economy will collapse; some have set dates while others have labelled it as an eventuality (which means nothing since anyone could say anything will happen "eventually" and never be proven wrong). But each and every time, through each and every danger, from inflation to rebellion, China has pulled through while growing spectacularly. That is why I don't buy these articles; I just look at annual growth trends. And that is why when I heard about China's supposed stock market "collapse", I didn't have to read 200 articles on it to see what everyone thought; I just looked at the 3 month, 6 month, 1 year, and 5-year trends, and I knew this is no catastrophe at all.
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The haters and doubters just can't stand to see a Communist China are doing so well that's why they have to make all kinds of stories and excuses to justify for their delusional theories. They forgot that China has the world's largest dollar reserves in the world at $3.3 Trillion. Plus there are other bonds as well in the hundreds of billions, not including assets.;)

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Equation

Equation

Lieutenant General
Xenophobia on the rise?
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..[
“The reason why we’re seeing this racialized narrative is people are looking for a scapegoat,” said Victor Wong, the Toronto-based executive director of the Chinese Canadian National Council.

“It’s infected the population,” he added. “People have bought into this narrative that there’s a flood of foreign money into the market when there’s just no evidence beyond a few anecdotes.”


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manqiangrexue

manqiangrexue

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Equation said:
Looks like a second day in the row of stock rising in China. Where are my naysayers and doubters at?:D I bet by tomorrow morning the Dow Jones and Wall Street will rise as well from this good news.o_O

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The naysayers and doubters (AKA Gordon Changs) are still here. They'll say, "It rose? A bubble is coming and it will explode, causing economic collapse. It fell? Haha, what did I tell you? The economy is in decline and will collapse! It stood steady? Tsk tsk tsk, that's stagnation; the economy is going nowhere and will eventually collapse." LOL There's really no direction it can go to shut a Gordon Chang up.
 
Blackstone

Blackstone

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SamuraiBlue said:
Here since everyone is just beating around the bushes with someone saying that the little people will not get hurt. Here is an article that discribes what really pulled the triger.



I am not pluck anything out of thin air. I have been following it and looking at the mechanism which is written above. The PRC government relaxed various regulations that triggered an artifical rise in the stock market resulting to a stock bubble that had burst. Like I said it is going to spill over to other investment schemes especially the shadow banking system that borrow money directly from individuals placing higher interests then normal banking.
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The article you posted is just another opinion that's not more or less authoritative than authors on the other side. Time will tell who is right, but given the fact "China is doomed" pundits have been consistently and utterly wrong for about 30 years, one might be forgiven to suspect they're wrong again. On the other hand, even a broken clock is right twice a day, so maybe China bears are finally right. I wouldn't bet your house on it though.
 
Equation

Equation

Lieutenant General
manqiangrexue said:
The naysayers and doubters (AKA Gordon Changs) are still here. They'll say, "It rose? A bubble is coming and it will explode, causing economic collapse. It fell? Haha, what did I tell you? The economy is in decline and will collapse! It stood steady? Tsk tsk tsk, that's stagnation; the economy is going nowhere and will eventually collapse." LOL There's really no direction it can go to shut a Gordon Chang up.
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Of course, as long as there is a xenophobic audience there is always be a crowd to sell to. I mean look at Donald Trump yammering anti-Mexican and immigrant comments lately.
 
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