China Economic Review


One of the great misconceptions about China is that its stock markets are equivalent to other major world markets. One of the ways in which this is not true, we would argue, is the extent to which the index is influenced by Those in Command.

There are those who argue the impact is usually more indirect and that when the index does something weird, like rise 2% in the last hour of trading, it is largely individual punters who are reacting to policy announcements or rumors of such announcements.

The alternative view is that it is largely the National Team directing traffic. We wouldn’t know for sure, but would guess it is more of the latter and that the former is anyway in fact much of a muchness. A case in point in this past week is the background to which is on balance negative news on the state of the economy, and China’s economic relationships beyond, particularly with the United States.

Atmospherically and anecdotally, the sense of negatives building is even more pronounced, and the message from the Center of resolutely holding to the correct propaganda path is particularly puzzling in the context of modern China, unless there are deeper concerns that go beyond what is visible to us minions.

And so to this week. With, of course, no inside knowledge and nothing but a gut feel to go on, it would appear Those in Command started the week with a decision to keep the Shanghai key stock index over 2,700. And they just managed to do it. Weird.