| Should China learn from US? | |
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| Mar 15, 2008 03:08 |   |
 | After US Fed announced to lend primary dealers in the bond market up to $200bn in Treasury securities for a month at a time and accept ordinary AAA-rated mortgage-backed securities as collateral in return, stock market surged very fast. Dow Jones Index increased 416.7 points. It seemed that Fed's move has taken effect. Compared with US stock market, Chinese stock market dropped seriously. The Shanghai Composite Index went down below 4000 points, closing at 3971 points. Some investor suggest that CSRC (China Security Regulatory Commission) should also take some measures to save the market. However,the vice president of CSRC said that they won't play the role of the rescuer and the investors should be confident about the stock market. Although the stock market met some trouble, the micro-economy is developing stably. What do you think of it? Should China learn form US to intervene in the stock market? |
| Mar 15, 2008 10:23 | #1 |
| It's sort of ironic that the majority of entrepreneurs(bond markets) whose philosophy is laissez-faire then turns to the government for assistance when the going gets tough. Instead of social welfare it's called corporate welfare and probably accounts for more $$$ than any and all social programs in the US. I can't answer the question because it's a Chinese situation and none of my business.But, Buyer Beware!! |
| Mar 15, 2008 11:48 | #2 |
| I agree with Gary. There are plenty of things we do in the USA that China could study and adopt...but this isn't one of them. (BTW-there are plenty of things you do in China that the USA should study and adopt) |
| Mar 15, 2008 12:15 | #3 |
| Monetary policy requires investment dealers to keep gov. T-securities in inventory as a channel to balancing money supply. Credit crunch scares everybody away from business, ie, banks are afraid to loan or renew loan, corps are difficult to get loan via commercial papers, it’s like the economic clock stops tick-tocks. Fed as lender of last resort buys back t-security as loan to bond dealer backed by mortgage-backed assets is a way to create money supply or increase market liquidity. China market seems to have no such problem. Chinese retail investors don’t seem to suffer a loss and they are just complaining that their margins are wiped off due to greed for more wealth in bullish mkt and not being out of mkt at the right time. |
| Mar 17, 2008 20:03 | #4 |
| Quote:"It's sort of ironic that the majority of entrepreneurs(bond markets) whose philosophy is laissez-faire then turns to the government for assistance when the going gets tough." Gary, the fact has proved that there is NO real free market in the world. Sometimes, governmental intervention is necessary. Griz, I agree with you that both China and US should learn from each other. "There are plenty of things we do in the USA that China could study and adopt...but this isn't one of them." Why can't China adopt similar measure to stimulate the stock market? "Chinese retail investors don’t seem to suffer a loss and they are just complaining that their margins are wiped off due to greed for more wealth in bullish mkt and not being out of mkt at the right time. " Yes, Marrie. These retail investors are blind. When the stock market is bullish, they invest much money in to make profits. However, they don't realize the recent slide in the stock market. Just look at Buffett and Li Jiacheng, they both sold many shares of Chinese companies last year. At present, they lose less in the stock market. |
| Mar 17, 2008 21:01 | #5 |
| I believe the Chinese government have the ability to rescue the stock market. It's a question of time -maybe they feel our stock market can still function well by itself. It's natural that stock index rises and falls. And now the government is trying to use economic measurements to help our economy stable and robust. However the effect is limited. |
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