China gets tough to tame volatile markets and realign growth

BEIJING: China has launched a crackdown to counter growing economic turbulence, and taken steps to infuse fresh liquidity to ease the country’s difficult transition from export-led growth to a consumption oriented “new normal” economy.

Faced with a cycle of stock market routs, the China Securities Regulatory Commission (CSRC) - the body that supervises securities — has taken the lead to target illegal stock market operations, which Chinese authorities believe were decisive in causing the market blowouts. On Friday, CSRC spokesperson, Zhang Xiaojun said at a press conference that 22 instances of illegality in the stock market have been identified. These findings have been handed over for detailed investigation by the Ministry of Public Security — the country’s powerful law enforcing arm.

The investigators will probe the role of 48 entities, including the 22 that have been recently identified, in their suspected role in market manipulation, insider trading, fake information and illicit business, involving unwarranted profiteering.

Analysts say the crackdown is driven more by political considerations — of restoring the faith of a vast number of retail investors in the markets. Mr. Zhang stressed that the CSRC’s task was to stabilise the market and protect the rights of investors.

A day after last Monday’s drop in share prices to an eight month low, Xinhua reported that eight people – including a top executive of a major mainland securities firm, an employee of a well-known media group as well as a serving and a former official of the national market regulator – had been taken for questioning over alleged market malpractices.

The report did not name the eight people but, South China Morning Post, said that Xu Gang, managing director of Citic Securities, one of China’s biggest securities firms ; Ouyang Jiansheng, a former CSRC department director in charge of market supervision; Liu Shufan, a CSRC division head; and Caijing magazine reporter Wang Xiaolu were among them.

There is speculation that Mr. Wang of the Caijing magazine has been detained on account of an article that he published on July 20 in which he asserted that the CSRC, which played a central role in ensuring a massive financial bailout, was preparing on a plan to exit the markets.

On Tuesday night, four other securities firms--Haitong Securities, GF Securities, Huatai Securities and Founder Securities-- were also under the regulator’s scanner.

Probing with stealth, a team of investigators led by the Ministry of Public Security had apparently been dispatched to the CSRC’s office since July 9, to help unveil “malicious short-selling” in the markets.

Notwithstanding the alleged malpractices in the markets, most economists agree that the Chinese economy, especially traditional manufacturing based on high energy consumption, is heading for a slowdown.

The China Academy of Social Sciences (CASS) is anticipating that a year-on-year growth in industrial output would be a slower 6 to 6.5 per cent in the third quarter, with a slight improvement to 6.5 to 7 per cent in the last three months. Since inventories remain high, industrial investment is also expected to remain weak in the coming months.

Of the 41 sectors surveyed by CASS from January to July, the mining industry contracted at the fastest pace, with a 10.2 per cent drop in output compared with the same period last year. But on the contrary, gas production, the computer sector, and telecom-related industries grew by a healthy10 per cent in the seven-month period, signalling the value of reorienting manufacturing.

Under its 10-year “Made in China” plan unveiled in May, Chinese authorities are focusing on 10 areas as the growth drivers of the “new normal” growth in the future, including high-end computer manufacture, numerical control machines, robotics, aerospace equipment, new-energy automobiles, and advanced railway transportation equipment.

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Printable version | Dec 3, 2021 2:02:25 AM |

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