May 24, 2022

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China rarely steps in to boost confidence after a market crash

China rarely steps in to boost confidence after a market crash

China’s top economic official intervened on Wednesday to reassure investors, saying that Beijing would take measures to support the economy and financial markets after a sharp sell-off that accelerated in the wake of Russia’s invasion of Ukraine.

Liu He, deputy prime minister and closest economic advisor to President Xi Jinping, said the government would take measures to “boost the economy in the first quarter”, as well as introduce “market-favourable policies”. He did not elaborate on the specific measures that would be taken.

Liu made the remarks after a special meeting of the Financial Stability and Development Committee of the State Council, which he chairs, according to a summary of the meeting published by Xinhua. The FSDC oversees the country’s major financial regulators, including the central bank and the Securities Watch, and meets regularly but such a large-scale statement to boost confidence is rare.

Investors in Shanghai, Shenzhen and Hong Kong — as well as in US-listed Chinese companies — were appalled by slowing economic growth, the inflationary fallout from the Ukraine war, and the Xi administration’s prolonged crackdown on previously fast-growing firms in the technology, education and property sectors.

Beijing has also halted plans to expand trials property tax China’s new news agency (Xinhua) announced late last year, citing the Ministry of Finance, in a move aimed at relieving pressure on the debt-burdened real estate sector.

The meeting, which Liu supervised, addressed a wide range of issues that added to the uncertainty about the Chinese economy. Beijing should expedite the correction and speedy completion of the country’s large tech platforms while making sure policies are transparent and clear, according to a Xinhua summary of the meeting.

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Chinese stock soared On Wednesday, Hong Kong’s benchmark Hang Seng Index had its best day since 2008, after rising more than 9.1 percent and It reached its lowest level in six years yesterday.

Hang Seng Tech jumped 22.2 percent after the meeting, with shares of Alibaba and Tencent, China’s two largest internet groups, up 27.3 percent and 23.2 percent, respectively.

The CSI 300 Index, which tracks the largest companies listed in Shanghai and Shenzhen, closed up 4.3 percent after falling more than 13 percent in the wake of the Russian invasion of Ukraine on February 24.

Larry Hu, Macquarie’s chief China economist, said Liu sent a strong message, “suggesting that policymakers are very concerned about the recent market crash.”

“With the heavy selling in the market and the bad economic situation, they decided to take action,” said Ming Liao of Prospect Avenue Capital.

He added, “They have made it clear that China will solve the problem of delisting technology companies in the United States, but I don’t think regulation of platform companies will ever go away completely. It may be more accurate in the future.”

chart Delisting the names of Chinese companies in New York Excessive access to audit records has also severely affected their stock, with the sell-off accelerating after the US Securities and Exchange Commission identified the first of 270 groups to be targeted if they do not turn in audit documents.

The FSDC said it has made progress on the issue with the SEC and that they are working on a plan to resolve the standoff.

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“The Chinese government supports companies from various industries to list abroad,” the meeting summary said.

The committee also urged regulators to come up with policies that are beneficial to the economy and to be cautious about pursuing policies that detract from growth.

“For any policy that will have an impact on financial markets, it must first be coordinated with financial regulators,” the committee said.

Additional reporting by Sun Yu and Edward White