Unusual times require desperate measures. “War-war” on collapsing stock prices and malevolent investors gave way to “jaw-jaw” over the weekend, as China’s central bank governor tried to calm markets with soothing words.
The “correction in the stock market is almost done” and China’s financial markets should become “more stable” after the currency steadies following last month’s devaluation, PBOC head Zhou Xiaochuan told G20 government finance leaders on Saturday (The Wall Street Journal).
Here’s a recap of the main attempts by China, usually through the China Securities Finance Corp, to boss the markets during the past couple of months:
- Sets up stabilization fund to buy shares
- Lends cash to 21 local brokerages to prop up equity prices
- Announces massive monetary stimulus and state spending to boost the economy
- Cuts interest rates
- Allows about half of listed companies to halt trading in their shares
- Bans major shareholders from selling their stakes for six months
- Threatens short sellers with arrest
- Suspension of all IPOs
- Relaxes rules on collateral for margin trading – that had inflated the stock bubble in the first place
- Devalues the renminbi
- Finds scapegoats: identifies, parades or punishes malicious traders, journalists and foreign investors apparently responsible for the rout.
- Intends to install circuit-breakers on exchanges to prevent panic selling
Posturing, waving the stick, intimidating, imposing arbitrary rules – all weapons of the blustering bully. Maybe charm and soft-soap will work instead and help the market gain a bit of confidence.
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