China Economic Review has always wished China well, dear readers. Truly we have. But now and then a little tough love is necessary to really drive home the message, and we daresay that if this week’s stock market lunacy didn’t warrant a healthy dose, nothing would.
It’s not that “circuit breakers” used to halt a falling stock market are a bad idea, mind. Plenty of stock exchanges have implemented them successfully as a way to cool down overheated markets. But when the mechanism forced bourses in Shanghai and Shenzhen to literally halt operations early on the very first trading day of the year, perhaps that should’ve been signal enough to the boys in Beijing that something was amiss.
In fairness, we suppose, the middle of the week held plenty of distraction. Authorities were putting the screws to Microsoft; Dalian Wanda was said to be purchasing a major American movie studio; China’s central bank moved to change how commercial banks’ reserve requirement ratios functioned; a missing Hong Kong publisher faxed his wife from the mainland to reveal he was “cooperating with the authorities“… oh, and North Korea claimed to have tested a thermonuclear bomb.
All cause for pause or concern. But really, did regulators really think that propping the market up for two days was going to solve things? We suppose when the trading day ended up 2.25% on Wednesday they must have figured “mission accomplished”. But like practically everyone who has ever uttered said phrase in living memory, it was spoken too soon.
Thus it was with renewed gravitational vigor mainland equities plunged 5% at the opening bell, froze for 15 minutes, then plunged another two percentage points to freeze markets for the day a mere half an hour into trading on Thursday. And so that evening – indeed, so late it was nearly Friday – regulators quietly announced an end to the ignominious circuit breaker policy, setting a land-speed record for policy retraction that somehow still managed to come far too late.
Normally this is where we’d throw in a nice, razor-sharp quip or two, but let’s face it, dear readers: China’s stock market is the real joke here, and any further attempt at humor would simply be gilding the lily.