Chinese Financial Market Is Safe, Says Analyst Post Drop
Zhou Xuedong, Director-general of the General Executive office, People’s Bank of China, stressed upon the fact that the recent downturn in China’s stock market was not a cause for any worry.
Though the drop was steep, it was a normal cycle of correction and only went to signify the maturity of the market players. They had he said come to a point of stability after the market declined to a 2500 valuation from the roughly 3500 which prevailed during the beginning of the year. The end of Friday’s trading day saw the Shanghai composite stand at 2,493.9, a 25% drop in 2018, the nastiest since 2008. Slowdown of the economy, financing issues among corporate and the ongoing tariff disputes between the U.S. and China were some of the factors attributing to the drop.
The current levels are half at what they were in 2015 but there has been a contrast in government behavior to the current scenario; a drastic shift from the earlier high levels of intervention to a more subdued stance. Companies struggling with ‘share pledges’ are finding support from investment funds which authorities are encouraging the local governments and private sources to establish. Reduced government interference in trading and enactment of market centered principles was the key to revival according to the Chinese State Council Financial Stability and Development Commission. A successful example given in this context was the rise in financing schemes made available to medium and small sized enterprises by the People’s Bank of China.
Zhou Lan, the Central Bank’s financial market department’s Deputy Director-general stressed upon the healthy functioning of the larger banks and stated that this was a cyclical phase which would pass. He further disclosed that China was undergoing a phase of transformation and its economy was getting more oriented towards the markets. There are several market systems which still remain to be taken up by the economy.