The Chinese government is demanding brokerages use their own money to help prop up the falling stock market with new requirements for stock buybacks.
The China Securities Regulatory Commission met with 50 stock brokerages over the weekend, and asked that brokerages begin buying shares from clients to limit selling pressure. In total, the CSRC is asking brokerages to buy up to 10% of the total value of the Chinese stock market.
China appears to be flailing. Its stock market stabilization efforts have failed miserably. It looks as if it has botched another attempt to let market forces have greater sway over the yuan’s exchange rate yet.
In recent months, negative predictions for the Chinese economy filled the news, and less than stellar performance that seemed to prove those predictions correct. Many analysts had predicted that China might enter into an economic recession echoing the one that occurred in much of the world in 2008, but notably had a much less significant effect on China. Given China has the second largest economy in the world, such predictions have dire ramifications for the rest of the world.
In the last decade, China’s serious gender imbalance has made headlines: millions of Chinese men are doomed to bachelorhood due to a shortage of women, with awful social consequences. The conventional wisdom is that this skewing — a sex ratio at birth far higher than the natural ratio of 105 males to 100 females — is caused simply and solely by China’s one-child policy.
Reading the latest Chinese growth projections to 2050 brings to mind Karl Marx’s aphorism that history repeats itself first as tragedy, second as farce. One of the co-authors, a Yale economics professor, told the Financial Times the ‘main point of our findings is that, contrary to common misconceptions, productivity growth under Mao, particularly in the non-agricultural sector, was actually pretty good’. But this is no argument to return to Mao-era policies, which would be a tragedy for the Chinese economy.
Greek elections and Fed policy loom large over international markets, but the world awaits with anticipation as Chinese officials try to mitigate sluggish growth, according to Reuters. Analysts expect banking authorities to ease reserve requirements to invigorate lending throughout the nation. Overall, the government aims to achieve a growth rate of 7.0 percent for 2015.
The massive explosion that tore through the port of Tianjin on August 12 has had a profound effect on the city. As well as the terrible loss of life and the unknown environmental effects to come, its economic impact on the city and wider region will be significant. However, it will have a more lasting political effect, as the government must seek to reassure people that their welfare is prioritised above economic growth.
News that the People’s Bank of China, the country’s central bank, changed its formula for calculating the reference rate of the yuan (RMB) prompted the currency to fall to a four-year low.
After many decades of driving regional growth, the economy of the People’s Republic of China (PRC) is now slowing down, and this is likely going to have a noticeable effect on the world economy and especially globally integrated economies in developing Asia.
On the other hand, countries like India, which is less integrated in the global economy for the moment, will likely remain insulated from the slowdown.
Chinese officials surprised the market by instituting a mini-devaluation of the yuan. Announcing the highest dollar fix in two years signaled the 1.9% move. Officials indicated that this was a one-off move in response to the appreciation of the real exchange rate. At the same time, it injected CNY50 bln through a seven-day repo operation, which offset part of the CNY85 bln of maturing repo and bills.
