The recent performance of China’s stock market has attracted great attention from all walks of life. Deng Yuwen, a Chinese political commentator living in the United States, wrote an article on the Deutsche Welle Chinese website on the 11th. He pointed out that the decline of China’s stock market can no longer be explained by economic factors alone. This may more likely be confidence driven by political factors. The crisis must be explained rationally from a political point of view. It’s not hard to understand why Chinese officials want to protect the market on the eve of the Spring Festival, “because they are worried about the terrible vicissitudes of public opinion.”
Deng Yuwen pointed out that when observers assess China’s economic and social risks in 2024, they mostly focus onreal estateand local credit. Although after several years of governance, a large part of the risks in real estate and local credit have been released, the risks in the market have not been completely cleared. For both, 2024 will still be a tough year.
Unexpectedly, when February entered, the risk of Chinese stocks suddenly increased significantly. Deng Yuwen believes that in terms of its impact on social psychology, it far exceeds real estate and local credit. The latter two, especially real estate, also have a great influence on social psychology.Ifhouse priceThe real estate company collapsed like the US subprime mortgage crisis in 2008. The value of real estate assets owned by ordinary people will also decline rapidly, not to mention the financial institutions involved.
Deng Yuwen said this is why Beijing officials did not dare to burst the housing price bubble when regulating real estate, even though the actual decline in second-hand housing prices in most cities in China has also been large.
Compared to the property market, the stock market is highly liquid and its short-term volatility is much higher than that of the property market. A stock market decline can instantly bankrupt a shareholder. China’s stock market has been falling in the last two years. The Shanghai Stock Exchange fell 15.13% in 2022, and it fell another 3.7% in 2023. Since the beginning of the year, before Huijin entered the market on February 5, the Shanghai Stock Exchange fell more than 9%, Twice fell below 2,700 points and as high as 2,635 points.
Deng Yuwen pointed out that while Chinese stocks continue to fall, global stock markets are happily rising.China andhong kongThe stock market is the only market in the world that has been falling for three consecutive years. This can no longer be explained by economic factors alone.
He said that although there is a lot of controversy in the outside world about the actual development level of China’s economy, the stock market is disconnected from the fundamentals of China’s economy and cannot reflect the actual economic conditions. In other words, the three-year decline in China’s stock market, especially this year’s decline, is more likely to be a crisis of confidence driven by political factors. This point will become more clear if we compare the Chinese stock market with the Hong Kong stock market.
Deng Yuwen believes that the withdrawal of foreign capital from the Chinese and Hong Kong stock markets is an important factor in the continuous decline of the stock markets in both places. Foreign investment, especially American investment, has withdrawn from the Chinese and Hong Kong stock markets due to security concerns due to strained relations between China and the United States and Western countries.
Deng Yuwen said that as long as the competitive relationship between China and the United States remains unchanged, it will be difficult to change the geopolitical environment unfriendly to China. Capital is the most sensitive. For high-risk markets, of course, it is necessary to withdraw as soon as possible.
The outflow of western capital from China will also affect the outflow of China’s own capital. However, there are more complex reasons for Chinese capital outflow. However, from a political point of view, they can be considered a distrust of capital towards the authorities.
Deng Yuwen pointed out that the recent decline in China’s stock market has finally made the public a little unbearable. This is because out of millions of investors, not many can withstand such a decline. If this decline continues, almost everyone’s stock market funds will be reduced to zero. Behind crores of investors are crores of families.
Deng Yuwen said that China is bound to be unstable in 2024, and anything that affects overall social stability will cause officials to have trouble sleeping and eating. Now, apart from real estate, the stock market is another source of risk.