The Effects of China’s Stock Market Turmoil

The Effects of China’s Stock Market Turmoil

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For years, there has been a “Chinese Dream,” popularized by President Xi Jinping, of China becoming prosperous and secure enough to create sizable investment opportunities due to their success being reflected in capital markets.

However, with the bubble that was China’s stock market finally bursting last month, that dream may never become a reality. The turmoil the market has experienced has reinforced the doubt most have in stocks. In fact, a recent Bankrate survey found that 76% of everyday consumers don’t trust the stock market because it is too complicated and risky.

Now, China is taxed with switching from stimulus growth to consumer-based growth, but with the shakiness of the market, that may be easier said than done.

“This has caused me a lot of heartache. It will take some time to recover,” said Zhou Sujuan, manager of a private medical device company in Wenzhou.

The problem is, there doesn’t seem to be a solution in sight. With lagging property, reduced consumer spending, and local governments saddled with almost $3 trillion in debt, China’s economy is predicted to grow by the slowest rate in 25 years.

The effect of China’s success or failure will be felt around the world, as worldwide economies rely on this market for their own success. No matter what the industry, the effects of a failure in revival could be catastrophic for the global economy.

It remains to be seen if any of the plans in place will work to fix the issue, but the recent measures have drawn criticism of the Communist Party. Some say they are not working to create an open or dynamic economy.

“The massive state intervention, especially preventing major shareholders from selling shares and going after short sellers, has damaged financial sector reform in profound and permanent ways,” said Victor Shih, associate professor at the University of California San Diego, who studies China’s finance policy.

Staff

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