The Chinese Communist Party (CCP) seeks to use national security forces to intervene in the financial sector, claiming to combat short-selling and other fund withdrawal behavior that results from the country’s depressed economy.
The ongoing downturn in the Chinese economy has triggered a frenzy of stock selling, a reaction by traders to downside risks as they speculate on a downturn in financial markets.
The Ministry of National Security stressed on Nov. 2 that “financial security is a pivotal component of national security,” and the national security organs need to “actively participate” in the economic and financial field to “monitor, hinder, and fight” financial crimes.
Those financial crimes are defined as “short-selling” and other short speculation behaviors conducted by some “ill-intentioned” traders with the purpose of “shaking the international community’s confidence in China’s investment and inciting financial turmoil,” according to the article.
The top security body also blamed U.S.-led Western countries, without naming them, for the regime’s weak economic power, saying that “individual countries” use finance as a geopolitical gambling tool and impose “financial sanctions.”
State security intervention in the financial sphere came after the CCP’s first Central Financial Work Conference, held in Beijing from Oct. 30 to 31, emphasizing the need for “comprehensive supervision, interception, and resolution of financial risks.”
CCP’s leader, Xi Jinping, gave the meeting speech, and his six Politburo Standing Committee members were all present, evidencing the state’s financial sphere in the saddle of the party’s top decision-making body, as opposed to previous regular finance and economics meetings chaired by the State Council.
Capitals Withdrawal
A regular trading market allows long positions and short positions to correspondly buy and sell stocks, which are bullish and bearish investment expectations, according to Mr. Da. In contrast, the CCP authorities tend to crack down on stock dumping, which will result in a non-functioning market. “If there is no one to sell, then there is no one to buy,” he said.Mr. Da believes the Chinese stock market will shrink dramatically shortly as the economy deteriorates.
Foreign investment is also weakening. Data from the State Administration of Foreign Exchange showed that direct investment liabilities posted a deficit of $11.8 billion in the third quarter of this year, the first time the debt had been recorded since 1998.
Financial Crisis Is Imminent
Economist Gao Feng said in an article last July, released on ipkmedia.com, that China is on the verge of an outbreak of a financial crisis, citing that almost all ten signs of the crisis have appeared in China, such as a stock market crash, a large-scale capital flight, a bank credit crisis, corporate debt defaults, serious asset price bubbles, a significant reduction in official foreign exchange reserves, a severe decline in the economy as a whole, high corporate or residential balance sheet ratio, corporate profits or residents’ income growth rate fell sharply, and a major disaster in the country.The reason why there was no full-blown collapse can be attributed to the CCP authorities’ administrative intervention to suppress it, as per Mr. Gao; however, this suppression can only be temporary as it will eventually increase the scope of the financial crisis and the power of the reaction, he said.
China’s economy has fallen on hard times; in addition to the local government debt crisis, real estate giants are also heavily in debt, with dozens of real estate companies reportedly breaking their capital chains.
Official data showed the Shanghai Stock Exchange Index fell below the 3,000-point mark in late October, and the exchange rate between USD and RMB has been “below 7” for five months.
