Pick One

The PRC’s stock market, such as it is, is continuing to fall, despite the government’s best efforts to intervene. And intervene they must because, as AEI scholar Derek Scissors put it in an interview posted on AEIdeas,

The Chinese government is reacting as if stocks crashing when it doesn’t want them to crash is a personal affront….

Well, alrighty then. And so, of course,

Early Wednesday, the Chinese authorities rushed out another raft of emergency measures to halt what is turning into a crisis of confidence in leaders’ ability to steer the economy.

They didn’t work, either. But the effort is just foolish. It’s possible to have a free market, a vibrant stock market, or a government-run market, but not both.

Let the market run and run its course. The outcome will be better educated, more cautious private investors, especially among the retail investors—guys like Xi from the farm—investors who will act with less irrational exuberance. Continued government interference will only serve to protect the citizenry from themselves, which is to say it will not protect them at all by denying them the opportunity to learn this lesson.

But, of course, the denizens of the Chinese Communist Party Know Better.

Update: Today, the Shanghai Index rose some 200 points, fueled in no small measure by government entities buying stocks and the government’s criminalizing short-selling.  In addition, trading in half the stocks in the Index remain suspended, by the decisions of the companies involved.  How much government persuasion was involved in those decisions is unknown.

We’ll see over the coming days whether these measures have durable effect or if today is an aberration in a continued slide.

Leave a Reply

Your email address will not be published. Required fields are marked *