Stock Market Crash Shows Chinese Authorities Have Given Up on Market

It’s great on the way up, but what happens on the way down?
Stock Market Crash Shows Chinese Authorities Have Given Up on Market
An investor gestures in front of screens showing share prices at a securities firm in Hangzhou, in eastern China's Zhejiang province on Aug. 24, 2015. STR/AFP/Getty Images
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Be careful what you wish for. In China’s case it wanted market forces to have increased dominance in its centrally planned economy. That works great on the way up, but many people forget there is a way down as well.

Case in point: Chinese stocks crashed 8.5 percent Monday, Aug. 24, wiping out all bubble gains for the year.

The reason: The authorities have really given up on the market. Previously they had defended the 3500 level as rock bottom, which was gone in a second today.

Market players had pleaded for more central bank intervention last Friday so it is almost surreal the People’s Bank of China did not follow through with the demand for further rate cuts. It also didn’t use any of the $300 billion earmarked to support the stock market ($160 billion of which has already come and gone).

The Chinese stock market has erased all gains for the year 2015 (Google Finance)
The Chinese stock market has erased all gains for the year 2015 Google Finance
Valentin Schmid
Valentin Schmid
Author
Valentin Schmid is a former business editor for the Epoch Times. His areas of expertise include global macroeconomic trends and financial markets, China, and Bitcoin. Before joining the paper in 2012, he worked as a portfolio manager for BNP Paribas in Amsterdam, London, Paris, and Hong Kong.
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