China Change, published: July 10, 2015
Before China’s recent, painful reckoning with the share markets, official media channels were abuzz with the limitless prospects for bountiful equity prices well into the future (“decades,” one optimistic commentator intoned.) Now, as retail investors grapple with their losses, and the full extent of the rout continues to play out, China Change here translates excerpts from Party media that helped to talk up the disastrous rally. – The Editor
We’re in an era of great change, and we can’t limit ourselves to the confines of the stock market to understand stocks. To grasp the future development of the stock market, we should see it from the national strategic perspective, and place it in the overall plan of the Chinese dream.
Looking at the stock market from a historical perspective, one should be able to see that our country’s economy and social system are facing a profound transformation. Domestic problems are intertwined and complicated. There is an enormous latent financial crisis, and the stock market must bear the great mission of dissolving this risk. Its role is to gain time for the comprehensive deepening of reform and the upgrading and transformation of the macro-economy. It serves the national strategy of China as a rising great power.
The importance of the stock market’s strategic position is ever increasing in our national strategy, and the government further recognizes its importance with every passing day. [….] With funds rushing in from society, the stock market already possesses the three key ingredients: “strategic need + policy dividends + capital boost.” Going forward, we must resolutely have a positive outlook on the stock market, and investors will be able to look forward to a stock investing opportunity of historic proportions.
— Shanghai Securities Journal, November 20, 2014.
“In 1948, when America rolled out the Marshal Plan, the American dollar gradually became an international currency. From the 1930s, American stocks saw a 75 year bull market! Over the following decades the Chinese stock market will also have ample foundation and conditions to gradually relish the fruits of the great rejuvenation of the Chinese nation —“the China Dream.”
This time around, the bull market is not a “speculative market” but a “confidence market.” The enormous dividends wrought by the deepening of China’s reform and opening will be enough to support a long term, stable, and growing bull market.
China needs a bull market that surges forth and unfolds on a massive scale. In the 1990s, the A market shouldered the task of state-owned enterprise reform; in the beginning of this century, it carried the great mission of banking reform; and now, it has hoisted the great banner of bringing China through the middle-income trap—honor permits no turning back.
—People’s Daily Online. “The ‘China Dream’ of A Stocks Calls for a Long Bull Market.” December 8, 2014.
“‘Reform Bull’ or ‘Leverage Bull’, there is truth in both. This market rise is a result of high expectations for the dividends of reform and opening up, a result of favorable policies piling atop one another. It is inevitable, and it is reasonable.”
—Xiao Gang, chairman of China Securities Regulatory Commission, March 11, 2015.
“Confidence is more important than gold.” Zhang Qun (张群), chief market strategist in the market research team at CITIC Securities, believes that the stock market reacts before the real economy in general. Currently, measures to comprehensively deepen reform are being carried out expeditiously, and the Two Sessions [i.e. the annual assemblies of the National People’s Congress and the Chinese People’s Political Consultative Conference] have drawn the blueprint for this year’s economic development. All of these factors are injecting market confidence in the stable and healthy operations of the Chinese economy. In addition, financial leverage is also playing an important role in bringing up the stock market as large quantities of funds are being invested.
—Xinhua, March 30, 2015.
The stock market hike conveys an important signal: Chinese economy is still maintaining a stable growth momentum, and its fundamentals haven’t reversed as a result of slowing down. The surge of confidence in the stock market has excited the entire society’s faith in development, and it allows the people to view the new phenomena under the new norm [i.e. China’s hoped-for ‘new economic normal’ of less fixed asset investment, more innovation, and more domestic consumption] with peace and optimism.
People’s Daily online. March 30, 2015
We unanimously believe that the sudden drop in the stock market imposes enormous financial risks. On the less damaging side, it could lead to the “sudden death” of the stock market and cause severe casualties among the newly emerging middle class who are the nucleus realizing the China Dream. If it becomes more serious, it could trigger doubts about the China Dream, and social instability. It absolutely must not be taken lightly.
[Among our recommendations] Immediately form the Central Government Financial Committee, and establish a joint command comprised of one bank (POBC), three commissions (CBRC, CSRC, CIRC), and one office (CAC). The 1-3-1 must work as a fist under unified leadership to coordinate actions and prepare for a long-term battle. Party Central must command finance the way it commands the gun barrel. In the end, it should establish a Central Finance Commission, similar to the Central Military Commission, according to the needs of modern financial soft war.
“Five Professors Call for Rescuing the Market,” Tencent Finance. July 2, 2015
This morning, deputy minister of the Ministry of Public Security Meng Qingfeng (孟庆丰) arrived at the China Securities Regulatory Commission with an entourage trailing behind him. They will work together with the CSRC in investigating leads on malicious short selling in stocks and stock indexes in recent weeks. This shows that supervisory organs will strike hard with a heavy fist against all illegal and irregular behaviors.
Xinhua, July 9, 2015.
Plunge in Chinese Stocks Leads to Bull Market for Gallows Humor, the New York Times’ Sinosphere blog, July 8, 2015.