China’s Zhou Kept Saying the Bubble ‘Burst’ at G-20 Meeting

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Zhou Xiaochuan
People's Bank of China Governor Zhou Xiaochuan. Photographer: Tomohiro Ohsumi/Bloomberg

Zhou Xiaochuan, governor of China’s central bank, said three times to a G-20 gathering that a bubble in his country had “burst,” Japanese Finance Minister Taro Aso said.

It came up in his explanation Friday of what is going on with China’s stock market, according to a Japanese finance ministry official.

A dissection of the slowdown of the world’s second-largest economy and talk about the equity rout which erased $5 trillion of value was a focal point at the meeting of global policy makers in Ankara. That wasn’t enough for Aso, who said that the discussions hadn’t been constructive.

Chinese stocks have plunged almost 40 percent since a June peak, triggering unprecedented intervention from the authorities. The central bank cut rates for the fifth time since November last month and lowered the amount of cash banks must set aside, falling back on its major levers to support equity prices and the slowing economy.

It was China, rather than the timing of an interest-rate increase by the Federal Reserve, that dominated the discussion, according to the Japanese official, with many people commenting that China’s sluggish economic performance is a risk to the global economy and especially to emerging-market nations.

Chinese Statement

Zhou was referring to a bubble in the stock market rather than the Chinese economy, Zhu Jun, head of the international department of the People’s Bank of China, said in an interview on Saturday, and the central bank put out a statement detailing Zhou’s remarks at the conference.

“It’s clear there are problems in the Chinese market, and at today’s G-20 meeting, many people other than myself also expressed that opinion,” Aso said after a meeting of finance chiefs and central bank governors.

The PBOC shocked global markets by allowing the biggest yuan depreciation in two decades on Aug. 11, when it changed the exchange-rate mechanism to give markets a bigger role in setting the currency’s level. That historic move would not get a mention in the communique, according to the Japanese official, who asked not to be named, citing ministry policy.

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