Little Time? At the end of the text there’s a summary.
While the euro countries struggling to find a compromise in the Greek crisis, draws on a much bigger threat to the European and the global economy in China. A sharp fall in the stock market where it leads to panic among investors. The Beijing government controls against. She wants to prevent the crash overlaps on the markets on the economy of the People’s Republic. In the fight against the crash the lead moves to Beijing a dual strategy: On the one hand they want to stop the sale of prohibited and relaxations. Secondly, it puts on a multibillion dollar stimulus package. The money is to be directed in particular need of assistance areas. At the same time the construction of roads and other infrastructure projects to be promoted. This government investment will provide impetus and more confidence on the stock markets.
On the stock markets in mainland China trade was stopped with titles of at least 1300 enterprises. At the same time, the authorities loosened the rules on share purchases by insurance companies that are now allowed to put significantly more money into the market. Panic selling pushed the CSRC another bar before: investors now have to hold half a year their shares if they own more than five percent of a company’s shares. For violations threatening harsh punishments.
The sell-off in China’s stock markets has caused a worldwide nervousness among investors and even asked the Greek crisis in the shadows. The important for mainland China the Shanghai stock market fell by six per cent and lost within three weeks about one-third of its value. This is the biggest crash for over 20 years.
Even during the past year, the stock market was positively exploded because the state using low interest rates put a lot of money available. The Shanghai Stock Exchange in 2014 put total by almost 53 percent. In mid-June announced the Securities and Exchange Commission on but to tighten the rules for the purchase of shares on credit. Small investors began panic selling. The Shanghai Stock Exchange lost in less than a month more than 30 percent of its value – a decline of $ 3.2 trillion (2.9 trillion euros).
“The party-state is losing the battle against the markets”
The government and central bank attracted already many registers to slow the sharp fall in prices. The key interest rate was lowered, the transaction fees are reduced or eliminated obstacles for debt-financed share purchases. Even the Central Bank goes mobile: With hundreds of billions of yuan of the purchase of shares to be funded now – without resounding success. “If the stabilization measures of the Chinese government does not bear fruit and waning investor confidence, which could be the Chinese economy weigh so heavily that this is for the global economic outlook to a threat,” warned the analyst Andreas Paciorek of CMC Markets.
The panic has escalated on the stock exchanges in neighboring countries and overthrew the commodity markets in turmoil. In Hong Kong, the stock index fell so sharply as since the 2008 global financial crisis does not.
Some experts see in the intervention of the Chinese leadership a threat. “It may perhaps temporarily stabilize the market, but in the long term it does not work,” said the Beijing Economic Professor Hu Xingdou. Planned economy methods were good not to correct. “We should respect market forces.”
“The party-state is losing the battle against the markets,” says Sandra Hepp from China Institute Merics in Berlin. “Public confidence is deeply shocked.” Affected are especially many small investors – from the hairdresser on the taxi driver to the maid; all those who can be infected by the recent gold rush. Now they waited for the all-powerful state, which has always been governed everything in China. “The credibility of the Communist Party is at risk,” Hepp said.The economic reforms are under threat. The losses of private investors weakened domestic demand, the stock market crisis brake the liberalization of the financial system. Small businesses would be weakened, the government sector dominates. Will China’s demand for imported goods weakened by a collapse of investment and consumption, the German economy would also be badly hit, warned Hepp.
The stock market was “divorced” from the real economy, says Professor He Xiaoyu from the University of Economy and Finance: “The problem is the large investors who buy or sell not rational.” They believed that they would have to follow only the party – and then if it was a problem, the government will manage very well. “So economic problems are political problems.”
summary A sharp fall in China’s stock markets makes financial experts worldwide concerns. Countermeasures of the leadership in Beijing hardly grab. The crash could weaken the economy in the People’s Republic – and inhibit global growth. In addition, the credibility of the Communist leadership is tarnished
Note:. In an earlier version of the article we wrote, the stock market had a loss $ 3.2 billion within one month. Is correct that it is trillion sums.
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