I tend to feel that the stock market is a red herring with China, considering the low number of people invested into it. I think it's more a symptom of economic stagnation than the source. Everybody already knew total market growth was slowing, and I think part of that coupled with government intervention is what's made the stock markets so volatile lately, and I think the reason they tried to implement a lot of that stuff was so they could inflate market growth. But no matter what, they're still seeing a slowing growth in GDP, and a growing political consciousness in the labor force that has led to rising protests year after year. People have been pointing to stock market issues as having potential to cause social unrest, but I stand with the many others who point out the stock market is a far smaller player in the Chinese economy than it is elsewhere. I think the real social unrest is going to come from the general slowed growth, and the change the Chinese economy sees now that it's becoming less a place for cheap labor.
I've heard there was something like 4 million new investors (Chinese people) in the Chinese stock market in May alone. The government had been really pushing investment in the markets recently. Do you think that has any impact on whether or not this is a serious problem?
4 million is a small number of people in China, and those new investors are largely trading rather small amounts of money. I was just watching this video this morning that explained it rather succinctly how the Chinese stock market doesn't hold as much influence.
The larger issue at hand is the enormous amount of private debt and the high rates on it. One theory is that the CCP was pumping the market to support these otherwise overextended companies. In a sense, they were socializing the debt rather than bailing them out directly. If this cause a crisis in consumer confidence, the fallout could actually be exacerbated by the stock market's tumble.
I've seen that theory a lot, too, and I wouldn't doubt it. They're very keen to prevent any more companies from defaulting on these large debts, but they also don't want to bail them out directly all the time, as can be seen when they let that one solar panel company default. I still don't think this crisis is going to do much to consumer confidence. Most Chinese people probably don't even have a very clear idea, and the tight media controls they've put around this event means that they weren't being exposed to the barrage of alarmism surrounding it.
"We all love anecdotes". I think the guy in the video approached the situation from a very rational and reasonable point of view. He does help put things in perspective for me. It will certainly be interesting to see how all of this plays out. The Chinese experiment with a command/market economy certainly is fascinating. Thanks for the link.