Friday, July 10, 2015

China - Reorientation in Financial Turmoil

Now that a Chinese stock market bubble finally burst, giving way to a 30% fall of shares, the global financial community is on the alert.

Shanghai Composite Index 09-07-2015

Here an excerpt from an article published by the British daily Telegraph on 9th July 2015:

" In any normal summer, a 30% fall in the Chinese stock market – a loss of value roughly equivalent to the UK’s entire economic output last year – after an ascent which had seen share prices more than double within the space of a year would have been front page news across the globe. The dramatic series of government interventions to stem the panic – hitherto unsuccessful, it should be added – would similarly have been up there at the top of the news agenda. Yet the pantomime of the Greek debt talks, together with the tragi-comedy of will they, won’t they leave the euro, has relegated the story to little more than a footnote - even though 940 companies, more than a third, have now suspended trading on China’s two main indices. "

The complete text compares China's current economic situation with the Black Friday Scenario of 1929 when the breakdown of U.S. stock markets caused a global economic crisis. It should be noted, however, that Chinese stocks are still much higher than a year ago !

On the same day, a Chinese language article, published by People's Network / Renmin Wang, dealt with the problem of "sleeping assets" that need to be activated in order to provide enough money for China's current economic needs. Here an excerpt from that article:


Half year report on China's economy: Revitalize assets and capital funds
to awaken the financial [system] from a sound sleep.


The chief economist of China's agricultural bank Xiang Songzuo proposes: In order to be able to revitalize assets and funds on the largest degree, it needs to further reduce taxes for China's small business. At the same time, people income tax should be adjusted. .......... From a macroscopic view it could be said that the tax burden in our country is too high. A suitable reduction of tax burden could again invoke a redistribution of such funds. As to the sectors or projects that really need financial support, this could realize more financial transfer payments.

[Source: People's Network 人民网 on 9th July 2015]


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