China is back-pedalling faster than Wile E. Coyote falling off a cliff edge in pursuit of an uncatchable Road Runner. It has now avowed to bolster its beleaguered markets.
The country’s financial stability and development committee – otherwise known as Xi Jinping, has called for monetary policy to support the economy.
It, otherwise known as the supreme leader, has also said that authorities should prudently introduce policies that have a contractionary impact on economic growth. Whose fault is it that the economy has contracted?
The Chinese government, aka the eternal leader, said it is working with American authorities to support listings overseas. This comes after the US SEC identified Chinese companies that could be delisted over the issue of auditor access.
The committee – its him again – also said it would keep Hong Kong’s financial markets stable, whilst enhancing regulatory communications and coordination with Hong Kong regulators. Who thought it would be a good idea to kill the goose that lays golden eggs?
Clearly, the market was delighted, or could it just be relief? A whole host of Chinese companies jumped with joy. Gains of 10%. 20% and even 30% was par for the course.
The rally has lifted China and Hong Kong stock-market indices. The Hang Seng Index soared nearly 10% on Wednesday for its best one-day gain since October 2008.
So, here’s the thing: what has changed? Nothing, really.
After years of following the shenanigans in China, one thing has become clear. Whenever, China talks about its country or its economy, it is actually referring to the Chinese Communist Party (CCP). The survival of the Party precedes the interest of the country.
So, what should we make of these policy changes? Let’s not forget that there is an upcoming “election” in which the president will be seeking an unprecedented third term, even though he has done an awful job.
China’s response to COVID has been nothing short of disastrous. Its handling of the Ukraine-Russia war has been clumsy. Let’s not even talk about the property market. And who thought that it would be a good idea for Xi to meet with the Moscow mugger at the Winter Olympics.
Elsewhere, China’s economy has slowed appreciably and could decelerate further. The economic numbers might seem to indicate some signs of strength. But anyone who believes the data probably also believes in the tooth fairy.
From an investing perspective, it is important to remember that the CCP wants control over the means of production, namely, resources. It controls land usage, the movement of labour, the supply of raw materials, and the transmission of money. Now, it wants to control the new resource, namely, data.
If we are happy with all that, then China could be a goldmine. But it could quickly turn into a minefield, which is why it is vital to tread carefully. We can put lipstick on a pig. But when the lipstick wears off, it is still a pig.
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