There have been many bizarre stories circulating about Chinese policymakers attempts to support the nation’s stock market in recent weeks.
We thought yesterday’s news that police, acting upon the request of regulators, were investigating the “malicious” shorting of stocks by investors was the top.
But no. There’s more.
According to a report from the Financial Times “on Sunday, the new graduates of Tsinghua University are set to gather in their smartest attire to celebrate degrees from one of China’s most prestigious institutions, a place that has fostered generations of political leaders. Just after the ceremony starts — according to a written agenda — the graduates must “follow the instruction and shout loudly the slogan, ‘revive the A shares, benefit the people; revive the A shares, benefit the people’.”
So graduates, according to this report, will be chanting a slogan that in order to support the Chinese people, the stock market must move higher. This is how China is sending off its best and brightest into their future careers, chanting in support of a system that is criminalising market behaviour, misallocating resources, showing a complete disregard for fundamentals, and engulfed in short-term thinking.
This does not bode well for the prospect of long-lasting and sustainable reform coming from China’s next generation of political and business leaders. Analysts from a range of institutions including Credit Suisse and Soc Gen have warned this week about the potential for this to put the brakes on President Xi Jinping’s reform program. The Wall Street Journal today reports on a possible domestic backlash against Xi, saying “there is a risk that the stock market crisis could trigger social unrest”.
A China expert at the University of California, Victor Shih, told the WSJ that Xi had “trumpeted reform for the past couple of years but a lot of so-called reforms have gone out the window with this dramatic… government intervention in recent days”.
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