* Beijing is turning away from tinkering withequities, writes Joe Zhang Financial Times, 5January 2015. https://next.ft.com/content/b476911e-b2ef-11e5-b147-e5e5bba42e51 张化桥在英国金融时报撰文: 让股市退烧, 让改革前进; 中国的供给侧改革还不完美, 但是方向正确, 可喜可贺! China should celebrate the collapseof its stock market. That was not the instinct of officialslast summer when the Shanghai Composite index lost close toone-third of its value in four short weeks. Back then, Beijing launched investigations into what it called“malicious short selling” and spent $200bnto propup falling equity prices. But give the Communist party its due.When one trick stops working, officials are not shy to admitit. The Shanghai Composite fell 7 per cent on Monday; further falls arelikely. Yet we are unlikely to see more of the heavy handedintervention to which officials resorted in 2015. This is notbecause Beijing does not have the means to prop up the index, butrather because officials have come to believe it desirable for highstock market valuations to be unwound. Large sections of the publicare beginning to agree with them. The most salutary moments in Chinese politics often involve suchsharp reversals. It was, after all, the realisation that fourdecades of central planning had produced only backwardness andstarvation that led Beijing to abandon Soviet-style governance inthe 1980s. Since then the country has pursued an industrial policy that hastransformed Chinafroman impoverished agrarian backwater into a manufacturing powerhousethat is one of the world’s largest economies. It is a formidableturnround — even if it has consumed vast resources, polluted theenvironment and yielded less of an improvement in living standardsthan might have been expected. In recent years that strategy, too, became untenable, as corporatedebts piled up and financial returns diminished. In the meantime, agrowing number of local governments were troubled by unsustainabledebts. Things came to a head in 2014 when, with none of the theoreticalspinning that usually accompanies a major change of policy inBeijing, officials began to see what they could do to pump up thestock market. The idea was to stimulate the economy without thehuge burden of public spending that would come attached to aprogramme of fiscal stimulus. The trouble with this approach is that the public foots the bill,not via the tax system, but through the more insidious form ofredistribution that occurs when an investor buys shares at a pricethat has temporarily been inflated by official action. From thebeginning, this policy was on questionable moral ground. It wasbecoming increasingly perilous, too, because the faster the stocksrose, the harder they could fall. Even after yesterday’s sharp fall, the Shanghai stock market indexis more than 40 per cent higher than it was for two years beforeprices began to take off in late 2014. Shares are likely to fallfurther. That will be painful for investors. But, outside thefinancial markets at least, it need not lead to drama. Realising this, President Xi Jinping is again changing course andhas begun touting the virtues of supply-side reform. This lookslike a sure sign that Beijing has had its fill of stock markettinkering and is turning instead to a watered-down version ofReaganomics. The new policy has two major elements. The first involves making iteasier for business to operate by eliminating tedious bureaucracy.The second entails giving the private sector a bigger role inpublic works projects, which in the past have been dominated bynotoriously corrupt state-controlled firms. These are good ideas as far as they go. But the government isshowing no sense of urgency, and even if it did, such limitedmeasures are not nearly enough. Tax cuts and privatisation shouldalso be on the agenda. Still, as the Chinese have discovered on their long journey toprosperity, when you are hungry, half a loaf is better thannone. The writer is author of “Party Man, Company Man: Is China’sState Sector Doomed?” |
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