Monday, September 14, 2015

Measuring China’s Stock Market Support

Prosecutors in China announced more convictions of stock-sellers today. There is an obvious problem with the official strategy of harassing traders who sell stocks. If selling stocks is a de facto crime, then where will the incentive to buy stocks come from? According to a story in Financial Times, today was the worst day yet in the Chinese stock market if you discount the major stocks that the central government focuses on. The Shanghai Composite was down 3 percent at the end of the day, but the average stock declined 7 percent, a jarring disconnect that shows how important the central government has become in day-to-day stock trading in China.

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