China's Unhealthy Obsession With Looking Good
Shutting down factories and ordering cars off the road so athletes could breathe at the 2008 Olympics, now that made sense. Propping up the stock market for a military parade doesn’t seem to have the same risk-reward profile.
But hey, that’s what the folks in Beijing have apparently decided to do. From Bloomberg News:
China’s government intervened in the stock market on Thursday to end a $5 trillion rout, according to people familiar with the matter.
China wants to stabilize equities before a Sept. 3 military parade celebrating the 70th anniversary of the victory over Japan during World War II, said the people, who asked not to be identified because the move wasn’t publicly announced. The intervention is the latest measure to ensure nothing detracts from the parade, an event the government will use to demonstrate its rising military and political might.
One message to take from this might be: sell Chinese stocks now before the market crashes again on Sept. 4.
Another is that the Chinese government continues to fumble around as it responds to a tanking stock market and a broader economic slowdown.
China expert Nicholas R. Lardy had an op-ed in Wednesday’s New York Times saying that alarm over the Shanghai and Shenzhen stock market crashes is misplaced -- equity markets don’t have much connection to the real economy in China, and the real economy is still growing. He’s probably right about all that.
But as far as I’m concerned it’s mainly the government’s flailing reaction to the stock market’s ups and downs this year that’s alarming. It gives an observer the impression that there’s something much more dire afoot, and that China's leaders don’t know quite what to do about it.
Maybe that’s not it. Maybe it’s just a bunch of men with dyed hair being overly obsessed with outward appearances, even though on the whole things are going OK. But it’s really hard to tell. I liked this quote from a Quartz article on Indian tech executives and their concerns about China:
“China has sneezed, and we don’t know whether this is just an allergy, a viral infection or something more serious. Plus, this patient is very secretive, so we don’t know much about its medical history,” Rostow Ravanan, executive director and former CFO at Mindtree, a mid-sized IT services firm, told Quartz. “Only God knows what’s going to happen.”
If only God knows, it would seem to follow that Xi Jinping doesn’t.
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