The prolonged slump in China’s stock market is so severe that leader Xi Jinping is willing to give it private attention, and it looks like his solution is to fire the country’s most sensible stock market regulators on Wednesday night.
The new head of China’s Securities Regulatory Commission is Wu Qing, nicknamed “Broker Butcher” for leading a crackdown on investors following regulatory violations in the 2000s, according to Bloomberg.
The announcement of a new head of the securities regulator came as a surprise to insiders, the outlet reported on Thursday, citing anonymous sources familiar with the matter. The move follows Bloomberg’s announcement that Xi needed to be briefed on the state of the markets they have lost. billions of dollars since peaking in 2021.
News of Xi’s private attention (a breakthrough) stoked investors’ hopes for a forceful market bailout. Of course, it was reported earlier that the feds were considering creating a stabilization fund to rescue the ailing stock market.
“Instead, Xi’s involvement, unsurprisingly, has produced a shift in the body of workers, with the impetus at the political point appearing to be toward administrative controls rather than addressing key challenges,” analysts at Eurasia Group, a political threats consultancy, wrote in a note. Wednesday via Business Insider.
This may simply be a challenge for China, which wants to achieve a convincing recovery. The country has been unable to sustain an accelerated expansion more than a year after COVID-19 lockdowns were lifted, rattling investor confidence.
Stock markets in China and Hong Kong accelerated their losses through 2024.
While Beijing has taken more than a dozen steps since January to try to stabilize the stock market slump and shore up disappointing stock market demands amid a financial crisis, sentiment remains at an all-time low.
“A lack of clarity on policy direction and preference for a security policy will continue to weigh on sentiment and disappoint expectations, reinforcing a sense of economic malaise,” analysts at Eurasia Group wrote.
Eurasia Group analysts do not argue that China wants to intensify its economic reforms to shore up its economy.
“Chinese government moves to restore private-sector confidence and boost the economy still lack a broad reform framework,” Eswar Prasad, a professor at Cornell University and a former International Monetary Fund official in charge of China, told Nikkei in an interview published on Monday.
The Eurasia Group analysts added that it wasn’t clear what conditions could trigger Beijing’s perception that it needs to move beyond administration controls to “more extreme measures,” but suggest it could be a sharp market slump that that causes systemic financial risks.
“Such an event can range from a challenge to the money market to seriously affecting the real economy, increasing unemployment, and increasing public discontent,” they wrote. “Ultimately, it would likely take social instability to undermine the broader reaction function of macroeconomic policy. “
The Hang Seng Index was down 1. 1% at 3:25 p. m. local time on Thursday. It’s down about 7% year-to-date.
China’s blue-chip CSI index rose 0. 6% after falling about 2% year-to-date.
The Hong Kong Stock Exchange will be closed from Friday to Tuesday for the Chinese New Year holiday.
Mainland Chinese markets will be closed on Friday and throughout the week.
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