China Should Slow Reform on Stock Rout, State Council’s Wu Says

China should slow the pace of opening up its capital markets after the recent equities rout, according to a researcher with the State Council.

The nation’s domestic financial rules appear to have gone “backwards” after the government took unprecedented measures to halt the stocks slide, Qing Wu, a researcher at the State Council’s development research center, said in a phone interview on Monday in Beijing. China’s goal of opening up the capital account and making the currency fully convertible is still a challenge and needs to be reassessed, he said.

The market rout wiped out almost $4 trillion and prompted the government to introduce a spate of support measures including suspending initial public offerings and allowing more than 1,400 companies to halt trading. Critics say intervention undermines the country’s pledge to increase the role of markets in the world’s second-largest economy.

“Given the series of measures the Chinese government had taken in rescuing the stock market since the market started to plunge from June, the domestic financial market rules appear to go backwards,” Wu said. “Therefore, the speed of the opening has slowed.”

People’s Bank of China Governor Zhou Xiaochuan said in March capital-account convertibility will increase this year and the nation is pushing for its currency to be included in the International Monetary Fund’s Special Drawing Rights in a review in November.

— With assistance by Wenwen Zhang

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