Free markets are calling Beijing’s bluff. The value of mainland stocks traded in Hong Kong (so-called H-shares) remains below their January 2010 level, left behind by an 18% recovery in the broader Asia ex-Japan regional index. The going has been even tougher for A-shares listed in Shanghai, down 11% over the same period. Last week, Singapore’s sovereign asset manager Temasek, a group that understands China deeply, further roiled markets with the announcement that it is selling substantial shares in two Chinese state-owned megabanks.
I would not call China’s stock market a free market. The best way is to call it a gamblers’ market, free or not is not the defining feature.
Premier Wen Jiabao recently declared that policy makers have successfully gotten the inflation genie back in the bottle. But this has come at the cost of months of draconian credit curbs. Those curbs hit particularly hard for private-sector small and medium-sized enterprises, that chronically under-fuelled potential engine of entrepreneurial dynamism and job creation which always ends up last in line for capital from China’s politically run state-owned banks.
Chinese entrepreneurs are highly resilient: they come back to life when the weather is nice and hide down when it’s chilly. Keeping this in mind, you probably won’t worry too much about them.
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