The system, through the Politburo, announced a long list of measures to bolster the economy, push the stock market up, help resolve the property market mess and restore confidence. The key Shanghai stock index zoomed up to finally get above 3,000 once again, and anyone shorting the market learned an expensive lesson. The only question left to be answered is…to what extent this is real and sustainable. Time alone will tell.
We have been here before, with the Center addressing market downturns with comforting words, although perhaps not with the scale of the “bazooka” like barrage of measures we saw this week. Are they really willing to let property values sink to a level where inventory can be shifted while also addressing the problems that lower valuations create? Will they really address the question of the fundamental divisions of wealth between the state and households? Will the division of the economy into state and private be reconsidered to a sufficient extent to make private companies feel encouraged to stop lying down? Can consumers be convinced by such measures to start spending? Where will the stock index be in a month’s time? All great questions. But right now, we have the 75th anniversary of the establishment of the People’s Republic of China in just four days and the country is heading into a holiday with at least a sense that the national government is aware of the struggling nature of the economic base.
So with a song in our hearts, allow us to wish all our readers a pleasant National Day holiday!