The China Securities Regulatory Commission (CSRC) has introduced a series of measures on August 18 aimed at revitalizing China’s stock market, in response to escalating global concerns about the sluggish Chinese economy and its far- reaching consequences.
The reform strategies put forth by the CSRC encompass several pivotal actions, including the reduction of handling fees for securities transactions and concurrent lowering of commission rates for securities firms. Moreover, they
involve expanding the domain of margin financing and securities lending, refining the mechanism for shareholding reduction, enhancing transaction surveillance for smoother processes, and investigating the potential for extended trading hours in both the A-share market and the exchange bond market.
Additionally, the CSRC has committed to endorsing share buybacks and encouraging long-term investments to uplift the stock market. Almost
immediately after the announcement, a prominent Chinese financial platform reported that the Shanghai Stock Exchange, Shenzhen Stock Exchange, and Beijing Stock Exchange intend to further decrease securities transaction
handling fees, beginning August 28.
China’s economy continues to grapple with lethargy, accompanied by a
sustained decline in the property market marked by defaults among major real estate players. The unexpected filing for bankruptcy protection by Evergrande Group in the United States on August 17 sent shockwaves throughout the market. The Chinese stock market remains delicate, the renminbi has
undergone substantial depreciation, and the formidable Zhongrong Trust faces potential default. Chinese assets, spanning A-shares, Hong Kong stocks,
Chinese concept stocks, and the RMB exchange rate, have all experienced consistent decline, while foreign capital outflows continue. Global investor trust in Chinese assets has plummeted significantly, prompting uncertainty regarding whether the Chinese communist regime will intervene to salvage
struggling domestic companies. Although the CSRC addressed ten questions during an August 18 press conference regarding the new reform measures, it refrained from providing concrete solutions to the most pressing market concerns.
In relation to stamp duty, the CSRC indicated that, once approved by higher authorities, it may reduce stamp duty across all securities transactions.
According to the CSRC, this measure has historically yielded positive outcomes by reducing transaction costs and rejuvenating the market.
Calls have also arisen for the adoption of the T+0 (same-day trading) system in China, which presently operates on a T+1 basis.
The CSRC has reasoned that implementing T+0 trading at this stage could escalate the risk of speculative trading and manipulation. Thus, the
prerequisites for introducing T+0 trading have not yet matured.
Critics, exemplified by an online financial expert, have contended that these measures are primarily superficial and fail to address the core challenge of China’s economic downturn. In an exchange with The Epoch Times on August 18, The expert argued that while the reductions in fees and select preferential measures might entice investors into the stock market, they essentially invite individuals to inherit a complex situation.
The expert further elaborated that given the overarching economic recession affecting all assets in China — be it the property market, stock market, or struggling Chinese enterprises — it remains improbable for the stock market to witness substantial improvement.
Analysts have weighed in on the measures, suggesting that an emphasis on additional share buybacks could temporarily elevate market sentiment, even
though it might not comprehensively alleviate the prevailing stagnation in the Chinese markets.
The expert underscored that China’s current predicament is fundamentally not about strategies for investing in the stock market to spur its recovery, but rather about the severity of China’s economic crisis.
He illustrated this by citing the examples of Evergrande’s bankruptcy and defaults by Country Garden. The expert highlighted that in the context of China’s property market, the three-decade-long property bubble is rapidly deflating, posing a grave threat to numerous real estate companies on the verge of bankruptcy.
According to statistics from mainland Chinese media, Chinese real estate companies have collectively incurred over 460 billion yuan ($63.2 billion) in market value losses during the initial half of this year. Among the top 100 Chinese real estate companies based on market capitalization, 70 have
experienced declines in market value. Notably, Sunac China witnessed the most pronounced contraction, with its value plummeting by 68.28 percent. The wave of real estate giants’ defaults has reverberated into the financial sector. As of
July 31 this year, 106 trust products, collectively amounting to approximately 44 billion yuan ($6.04 billion), had defaulted, with the majority of defaults
linked to real estate investments. Sizeable defaults in financial products were also observed last year.
The expert highlighted that the global community now recognizes the risk of China’s economic downturn, with significant apprehension about the potential bursting of China’s property market bubble.
In this context, the expert continued, when the property market crisis, banking crisis, and China’s local debt predicament converge, the complexities of the Chinese economy cannot be promptly untangled. This recession might endure for a decade, two decades, or even as long as thirty years.
In his view, the CCP is unlikely to weather this crisis. In previous instances of crisis, external forces have stepped in to provide assistance. For instance,
during moments of near-collapse, the CCP introduced reforms and opening up to attract foreign investments and technologies, enabling survival. In 1998, amid extensive layoffs and a looming banking crisis, China’s accession to the World Trade Organization played a pivotal role in rescue efforts.
However, the current circumstances suggest that there’s no external force capable of salvaging China’s economy. Hence, the likely outcome points toward a significant collapse, formally marking the advent of China’s economic crisis. This time, the CCP is unlikely to endure.