With stocks swooning, trillions of dollars — and confidence in government policy — hang in the balance.
While much of the world’s attention remains focused on the Greek debt crisis, another financial storm of much greater proportions is brewing on the other side of the world. In a dizzying drop, the Chinese stock market has lost about $2.7 trillion, or about a quarter of its value, since June 12 — an amount equivalent to six times that of Greece’s foreign debt. Much of the lost wealth has hit the pocketbooks of middle-class Chinese. As China’s government rushes to prop up prices, millions of Chinese are on tenterhooks as they anticipate a Monday opening that could make or break their finances — and perhaps their confidence in the market’s future.
The Chinese government, widely seen as having staked its legitimacy on stable economic growth, has been active since once-sizzling stocks began to swoon in mid-June. Over the past several weeks, the government has cut interest rates, lowered capital requirements for banks, and released a draft law that would allow state-owned pension funds to invest in the markets. None of those measures staunched the bleeding, and after another brutal week for stocks, the government has used the weekend to announce major moves, some unprecedented. These include a moratorium on new initial public offerings on the Shanghai and Shenzhen stock exchanges, as well as the establishment of a $19.3 billion fund to buy shares in hopes of propping up demand. With the market due to open as usual on Monday morning, many in China are wondering aloud if those measures will be enough to stop the free-fall.
With the savings of so many small-time investors at stake, including up to 31 percent of current college students, according to a June report from state news agency Xinhua, it’s small wonder that the Chinese blogosphere is full of nervous hand-wringing. On July 5, two of the top-trending hashtags on Weibo, China’s huge microblogging platform, referred to the future of the market, together drawing tens of thousands of comments. Some believed that government measures would stabilize the market’s wild fall; others were far less sanguine.
“The government’s attitude is clear,” Hong Rong, a finance expert at Shanghai DZH Limited with more than half-a million followers on his Weibo account, wrote on July 5 in a widely forwarded post. Worried microbloggers had flooded him with inquiries over the past several days, and Hong evinced confidence that the government would not allow a full-fledged financial crisis to occur. “They are determined to save the market and take effective measures,” Hong wrote. “And they have basically already blocked the possibility of a continued slump next week.”
Ye Rongtian, a stock analyst and blogger with more than 500,000 followers on his Weibo account, seemed just as optimistic. “Don’t be blinded by the drop,” he wrote on July 4, in a comment shared more than 2,000 times. “You might think that this is a good opportunity to offload shares, but I see this year’s market reaching 6,000.”
And one online poll conducted by Weibo, though hardly representative with only 6,400 answers, indicated that 61.5 percent of respondents believed that the market would experience a “rebound” in the coming week, while 33.9 percent believed that the market would “rebound slightly, then continue to fall.”
Some seemed aware of the possible consequences for the ruling Communist Party’s legitimacy if the emergency measures do not work. “If the market continues to fall tomorrow,” wrote another in a popular comment, in another reference to a (possibly spurious) report of elderly women at stock trading halls bursting into patriotic song. “Who knows if the aunties will continue to shout the slogan ‘May the Communist Party live for 10,000 years’?” A July 2 discussion on Zhihu, a question-and-answer forum similar to Quora that tends to attract young, educated users, centered around the question on everyone’s minds: “What will happen if the stock market crashes in 2015?” Some seemed to think that it was a matter of life and death for the party. “If the stock market crashes, it will kill the party and kill the country,” wrote one commenter.
State media has also shown itself willing to beat the bull market drum. On the evening of July 4, party mouthpiece People’s Daily issued a peppy Weibo post reminding readers that the government had rolled out “wave after wave” of measures intended to stabilize the market. It ended with an upbeat, “Stock market, see you tomorrow!” An unsigned editorial in the often nationalist state-run Global Times headlined its website on July 5, calling upon “everyone to stop debating whether or not the government should ‘save the market,’” but instead to “support the government” measures to “stabilize” it.
Official censors busily combed through stock-related posts on Weibo, deleting those that crossed a line. One such post was by Beijing-based magazine Caixin columnist Liu Shengjun, whose online writings have been skeptical of Chinese stock markets. In a July 4 post deleted by censors but captured on mirror site Freeweibo.com, Liu unfavorably compared the Chinese stock market with the New York stock exchange. “The United States [market] has strict oversight, while China does not,” wrote Liu. “And in China, the Securities Regulatory Commission dictates the pace of IPOs; but in America, it is the investors who have the final say.”
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