The Chinese government certainly likes to control things. It keeps its currency artificially low to promote exports. It meddles heavily in real estate prices. And it is obsessed with controlling information on the Internet.
But nothing has been as jarring to American sensibilities as its recent efforts to prop up stock prices, which began plunging this summer after a huge run-up in late 2014 and the first half of 2015.
In its bid to push prices back up, the government has bought stocks directly and lent to brokers to buy as well. It has halted trading in certain shares, barred large shareholders from selling and loosened restrictions on margin buying. If these weren’t enough, it has cut interest rates and initiated another round of fiscal stimulus.
Efforts to artificially prop up stock prices are, of course, doomed to eventual failure. Markets are driven by greed and fear, conventional wisdom and contrarianism. Attempting to control basic human emotions and thoughts is about as realistic as controlling the weather. When it rains, you can go inside or get wet. You can’t stop it from raining.
But China is trying. Its efforts are particularly disturbing as they show how the government is heading in the wrong direction on issues of economic and political reform. Instead of beginning to privatize some of its more than 100,000 state-owned enterprises and instituting other changes, China is clamping down on an emerging culture of ownership.
It might be doing this in the name of protecting people’s investments. But, at bottom, it is preventing people from buying and selling something at a mutually agreed price. It is trying to have the rewards of rising stock prices without the risks, just as it is trying to have the benefits of capitalism without democracy.
Those in the West who’ve watched China’s rapid ascent have long thought that economic growth will eventually force some level of democratization. This will happen, Westerners believe, when an educated middle class demands more freedoms and when businesses demand greater access to information, more transparency in government and consistent laws they can navigate.
China's stock market intervention suggests that line of thinking could be overly optimistic. So far at least, most Chinese appear content to have rising standards of living without the messiness of democracy. And Chinese leaders are committed to a form of authoritarian capitalism that attempts to marry free enterprise and political control.
Nowhere is that commitment to control more evident than in the Chinese government’s determination to undermine the Internet by imposing a "great firewall" within its own borders and by trying to turn theWorld Wide Web into a Balkanized communications platform that national governments control as they see fit.
Earlier this year, China, Russia and several other countries proposed that theUnited Nations adopt an Internet “code of conduct.” Such a regime would give governments control over technical protocols that currently make the Internet a seamless global presence.
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James B. Stewart , The New York Times: “Even in the market-oriented United States, stock prices are not entirely free from government influence. ... But the United States has never embarked on the direct purchase of stocks in an effort to prop up the entire market, and such measures elsewhere have been rare. (Tsuyoshi Jin Saito, a founder and managing director of the Observatory Group ,) warned that the best China can hope for, even with major intervention, is to buy time while it waits for the country’s economic fundamentals to improve.
Jennifer Carpenter and Robert Whitelaw ,CNBC: “The new normal of lower but sustainable growth is still arguably on track. ... But what is both surprising and troubling is the response we have seen from the Chinese authorities. First, there were attempts to cool down the fast rising markets with limits on margin trading. More recently, we have seen a set of panicked reactions as the market has plummeted, ranging from dramatic reversals of these margin trading limits, to interest rate cuts, halts on new IPOs, and direct and indirect cash infusions into the market. The instinct to protect investors and maintain stability is laudable ... but China should be playing a long-term game.”
Daniel Altman , Foreign Policy: “These restrictions are designed to keep the control of Chinese companies in Chinese hands. They’re also supposed to stop foreign speculators from playing havoc with Chinese markets.”
But nothing has been as jarring to American sensibilities as its recent efforts to prop up stock prices, which began plunging this summer after a huge run-up in late 2014 and the first half of 2015.
In its bid to push prices back up, the government has bought stocks directly and lent to brokers to buy as well. It has halted trading in certain shares, barred large shareholders from selling and loosened restrictions on margin buying. If these weren’t enough, it has cut interest rates and initiated another round of fiscal stimulus.
Efforts to artificially prop up stock prices are, of course, doomed to eventual failure. Markets are driven by greed and fear, conventional wisdom and contrarianism. Attempting to control basic human emotions and thoughts is about as realistic as controlling the weather. When it rains, you can go inside or get wet. You can’t stop it from raining.
But China is trying. Its efforts are particularly disturbing as they show how the government is heading in the wrong direction on issues of economic and political reform. Instead of beginning to privatize some of its more than 100,000 state-owned enterprises and instituting other changes, China is clamping down on an emerging culture of ownership.
It might be doing this in the name of protecting people’s investments. But, at bottom, it is preventing people from buying and selling something at a mutually agreed price. It is trying to have the rewards of rising stock prices without the risks, just as it is trying to have the benefits of capitalism without democracy.
Those in the West who’ve watched China’s rapid ascent have long thought that economic growth will eventually force some level of democratization. This will happen, Westerners believe, when an educated middle class demands more freedoms and when businesses demand greater access to information, more transparency in government and consistent laws they can navigate.
China's stock market intervention suggests that line of thinking could be overly optimistic. So far at least, most Chinese appear content to have rising standards of living without the messiness of democracy. And Chinese leaders are committed to a form of authoritarian capitalism that attempts to marry free enterprise and political control.
Nowhere is that commitment to control more evident than in the Chinese government’s determination to undermine the Internet by imposing a "great firewall" within its own borders and by trying to turn the
Earlier this year, China, Russia and several other countries proposed that the
Other views:
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