The Real Risk Behind China’s Stock-Market Drama
Official and quasi-official Chinese pronouncements carry the ring of prophesy. In the heyday of socialism, the Party forecasted the size of the following year’s harvests and the quantity of steel production, and the final numbers were rarely permitted to deviate much from the predictions.
.. In recent years, two-thirds of China’s new investors have been individuals who do not have a high-school diploma. With the property market weakening and few other reliable investment options available, the stock market looked like a good bet, and banks permitted people to take out loans to buy even more shares.
.. Since stepping into office, in 2012, President Xi has offered his people a harsh but tantalizing bargain. He has arrested thousands of people for political activism (including, this week,many human-rights lawyers) or for corruption; at the same time, he has signalled to the rest of the population that, if it can avoid those minefields, it will be free to pursue the “Chinese Dream”—his recipe of prosperity, pride in China’s rise, and a menu of state-sanctioned freedoms, including travel and entertainment. It is, a marketer might say, a value proposition based on performance, and a stock-market collapse would have imperilled the deal—and so it was halted.