Stock market crash banks

CHINA is certainly not the first country to try to prop up a falling stockmarket. The central banks of America, Europe and Japan have all shown form in buying shares after crashes and cutting interest rates to cheer up bloodied investors. Growth, though slowing, has stabilised recently. Other asset markets are performing well.

Property, long in the doldrums, is turning up. Money-market rates are low and steady, suggesting calm in the banking sector. The anticipated correction of over-valued stocks hardly seems cause for much anguish.

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Had the central bank stopped at cutting interest rates—justifiable support for the economy when inflation is so low—that would have been reasonable. Instead, there has been a spectacle of ever-more drastic actions to save the market. Regulators capped short selling. Pension funds pledged to buy more stocks. The government suspended initial public offerings, limiting the supply of shares to drive up the prices of those already listed. Brokers created a fund to buy shares, backed by central-bank cash.

All the while, state media played cheerleader. Far from saving the market from drowning, the succession of life buoys only pushed it further under water. Theories have flourished about why the government has waded in so heavily. The apparent desperation is, some believe, a sign that officials see a looming economic collapse, and are trying to staunch the wound before social upheaval ensues.

That story is intriguing, but it is not the most likely.

Lost in all the drama about the stockmarket is that it still plays a surprisingly small role in China. Many stocks were bought on debt, and the unwinding of these loans helps explain why the government has been unable to stop the rout. But this financing is not a systemic risk; it is just about 1. If economic stability is not in peril, why then the panic? The how to trade in options icicidirect compelling explanation is politics.

The government has staked much credibility and prestige on the stockmarket. The sudden end to the rally is the first major dent in the public standing of the Xi-Li team. The botched attempts to stabilise the market only make them look weaker, giving succour to their critics.

But the biggest concern about the panicked policy response is what it says about the government's agenda. The actions of the past ten days have broker chris gardner stock abundantly clear that it make money fixing broken electronics still the other stock harley exhaust louder around: The failure of share prices to do their bidding is, in that respect, welcome.

It shows that the Communist Party, powerful though it may be, cannot indefinitely bend markets to its will.

Chinese leaders should heed that lesson and get on with the challenges stock market crash banks liberalising their economy.

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