Just a very quick post on the collapse in the Chinese stock market, and how it's being (mis)reported by mainstream media in China and in the West.
Reports in the media have all been saying the same things, which can be summarised as follows:
1. The Chinese government are doing all they can to stop the collapse.
2.The People's Bank of China is supporting the market, buying shares, helping brokers, and will do anything to keep it all propped up.
3. Interest rates are being slashed again to try to keep the bubble afloat.
4. Eventually, the Chinese will socialise the stock market and maybe the housing market.
Here are a few links of stories doing the rounds this week:
(The opening line from the Bloomberg presenter in the video: 'What can the government do here to restore confidence'). Help us dear government, please don't let your people suffer, make things nice and fluffy again. That's the world we live in folks.
A few interesting quotes from that last link: 'China froze share offers and set up a market-stabilization fund on Saturday, the Wall Street Journal said, as Beijing intensified efforts to pull stock markets out of a nose-dive that is threatening the world's second-largest economy. Beijing's reported suspension of initial public offers (IPOs) came a few hours after extraordinary announcements by major brokers and fund managers, which collectively pledged to invest at least $19 billion of their own money into stocks. China's government, regulators and financial institutions are now waging a concerted campaign to prop up the nation's two main share markets, amid fears that a meltdown would rock the financial system and inflict heavy losses across an economy where annual growth is already running at a 24-year low.'
$19 billion! A huge sum of money. But did you know that this figure represents less than 0.4% of the market capitalisation of the Chinese stock markets? You probably didn't, because the media didn't mention that, as it would ruin the narrative for you. The suspension of IPOs, is 'reported' you will note. I can imagine there were dozens of companies looking to launch IPOs these past 2 weeks into this crashing market, so a good job the government suspended them, reportedly. It's a good line though, many will believe it. I don't.
Here's a link to the People's Bank of China's website:
Here's a link to the China Securities Regulatory Commission website:
Why not spend a fun half an hour trying to find ANY official press release or other information on the huge efforts being made by these two organisations to prop up the markets. Good luck in your search. Please do let me know if you find anything though.
All that I found on the PBC website was this announcement regarding targeted interest rate cuts:
Here's what they announced:
'The PBC has decided to provide targeted reserve requirement ratio (RRR) cuts for selected financial institutions as of June 28, 2015, in an effort to step up support for the development of the real economy and promote structural adjustment. First, the RRR will be lowered by 0.5 percentage points for city commercial banks and non-county-level rural commercial banks that have reached the targeted RRR reduction standard in terms of the share of loans to the agricultural sector, rural areas and farmers in total lending. Second, a reduction of 0.5 percentage points will be applied to the RRR of large state-owned commercial banks, joint-stock commercial banks and foreign-funded banks that have reached the targeted RRR reduction standards in lending to the agricultural sector, rural areas and farmers, or to micro and small enterprises. Third, the RRR will be reduced by 3 percentage points for finance companies to further motivate them to do their part in increasing the fund use efficiency of enterprises.
At the same time, to further reduce financing costs for enterprises, the PBC has decided to cut RMB benchmark loan and deposit interest rates for financial institutions as of June 28, 2015. The one-year benchmark loan interest rate and deposit interest rate will both be lowered by 0.25 percentage points, to 4.85 percent and 2 percent, respectively. Adjustments are made correspondingly to benchmark interest rates on deposits and loans of other maturities, and to deposit and loan interest rates on personal housing provident fund.'
Everything is being aimed at the real economy, and it's crystal clear that China knows that the real economy is what matters. They may make various media announcements about the stock market to steer the narrative for the masses (your government does care about your stupid investments going down the tubes and we are really doing all we can to help you, but sadly it doesn't seem to be working, oh well, shit happens folks).
So, narratives, it's all about narratives. But the truth is that China are more focused on the real economy than the US, UK and many other developed countries, which remain beholden to the financial sector of the economy. China are slowly but surely becoming a major player in an ordo-liberal world, along with the Eurozone.
Edit 12th July 2015:
More narratives for you
From that article:
'The latest warning by the China Securities Regulatory Commission (CSRC) is meant to clamp down on a trick whereby a single investor controls multiple accounts -- often registered under other people's identification numbers -- to bid the price of a stock up or down.'
It's rather obvious that banning multiple trading accounts is not a measure designed to reflate the stock market bubble, rather the opposite. But the narrative remains steadfast, that 'China' wants to blow the bubble up again. Think for yourselves.