.China's stock market, which opened 11 days after the spring festival, is in a panic, which is the worst drop since 2015, and has been refocused on its stronger role.
According to Bloomberg News on the 3rd, the Shanghai Composite Index plunged 8.7% at the same time it opened, and the Shenzhen ingredient index fell more than 9%, but the market failed to make up for the fall.
The measures immediately taken by the Chinese authorities to stabilize the financial markets are not working.
According to Bloomberg, the People's Bank of China provided liquidity of 1.2 trillion yuan (204 trillion won) through reverse repurchase obligations (RP), and the reverse RP interest rate also fell 0.1 percentage points to 2.4 percent.
The liquidity supply through reverse RP is the highest since one day since 2004. Reverse RP, except for the expiration of the day, the actual additional liquidity of 150 billion yuan.
Separately, the China Securities Supervisory Commission recommended that securities firms not request additional margins or sell their holdings.
Experts analyze that current measures by Chinese financial authorities cannot stabilize the market unless the economy stopped after spring festival is back in operation. In addition, China is at war with bad loans, which is also negative for market interest rates. Thus, there are observations that China is more open for intervention, as it did when it provided liquidity of 4 trillion yuan ($ 570 billion) during the 2008 global crisis that broke out with Lehman Brothers. In some cases, like a helicopter is sprinkling money, the central bank is looking at the possibility of helicopter money, a monetary policy that will supply new money to boost the economy. There are many ways to use helicopter money.
There are ways to buy government bonds directly from central banks or put money into government accounts. The money could be used by the government to increase spending in ways such as infrastructure investment. You can also take money and hand it out to the whole people. In China, which pursues a market economy in the economic sector but politically adheres to a socialist system, Bloomberg said, there is a strong belief among governments that only the government can stabilize the financial market in panic as it is today.
If China had been struggling in export disputes with the United States until last year, now two-thirds of the economy has been suspended due to the impact of a new coronavirus infection, which is disrupting production. The recent surge of new corona deaths and confirmers confirms that China's bureaucracy has no grip on the virus yet. While the central government is trying to prevent the spread of the new corona, the local governments are unlikely to dare to resume their economic activities. Because of this, investors have the expectation that China, the strongest country in China, will be more active, Bloomberg said.
