Xinhua, China’s official news agency, commemorated the latest crash in Chinese shares with a tweet that read: “The return of the debacle!”
The state-run Beijing News quoted one spooked investor – named only as Mr Wang – who joked that Monday's plunge was like "returning to the time before Liberation" in 1949.
Rajiv Biswas, chief Asia economist for analysis firm IHS Global Insight, said the latest slump showed that Beijing's attempts to stabilise the stock market following the recent collapse, including extending massive loans to buy shares, were not paying off.
Frenzied selling
Why is China’s stock market in crisis? “The government has been trying to hold back the tide like King Canute,” he said. “This is now a stock market crisis and you can see . . . that they are not really sure how to address it. Today’s developments are just going to put this even more at the centre of their economic problems.”
The latest day of frenzied selling – which analysts said reflected weaker economic data out of China as well as a lack of confidence in Beijing's response to ongoing stock market chaos – was a slap in the face for the country's Communist party leaders. Beijing launched an unprecedented push to prop up the country's stock market after a collapse, that began in mid-June, saw more than $3 trillion wiped off the value of listed companies.
‘Address the economy’
In a note following the latest slump, analysts at consultancy
Capital Economics
wrote: “The lesson from China’s last equity bubble is that, once sentiment has soured, policy interventions aimed at shoring up prices have only a short-lived effect.”
Biswas, the IHS economist, said Beijing’s attempts to turn the situation around by intervening in the stock market were doomed to fail.
“They really have to now respond more forcefully with monetary and fiscal stimulus to try and get the economy on an upward track again. Instead of trying to address the stock market they need to address the real economy, which I think is the root problem right now,” he said.
The nosedive stoked wider fears about the world’s number two economy, affecting the prices of commodities. – (Guardian News and Media)
