The Financial Crisis Of The Chinese Stock Markets

After languishing for the past six years after the financial crisis, the Chinese stock markets suddenly took off last summer, becoming a cauldron of voracious buying, selling and spectacular profit-taking. In fact, drawn by the casino-like profits to be made in the boom, more and more small investors flocked to the thousands of brokerage houses that are now proliferating in every Chinese city in order to buy and sell while staring up at flickering electronic data boards charting the rise and fall of equity prices.Stock shares of newly listed companies soared thousands of percentage points within months of their initial public offerings, driven upward by a green and growing cadre of relatively unsophisticated private investors that†¦show more content†¦According to Neil Gough’s Chinese shares tumbles again, â€Å"The main Shanghai share index plunged 8.5 percent on Monday, its steepest one-day drop in eight years. The volatility continued on Tuesday morning, with Sha nghai stocks opening down 4.4 percent.† The Shang Hai Index fall from 5000 to 3500 in one week, and share holders lost more than $3 trillions.Worried about the fallout, the government moved aggressively to prop up the stocks. Authorities suspended initial public offerings, introduced a $120 billion market stabilization fund backed by the central bank, and encouraged executives to buy company shares, which is very similar to what U.S. did in 2009. The fact that Chinese stocks were climbing ever higher while the Chinese economy was cooling should have been an unmistakable warning of a bubble, but it caused surprisingly little concern.Some people claim that this Chinese stock market crisis is the same as 2008’s financial crisis. However, there is a big difference: American’s financial crisis could be described as a byproduct of the neoliberalism trend happened after the 1970s. Over consumption and overdraw from future income is the main cause of 2008’s global crisis, which also greatly affected China’s economy; but today’s Chinese stock crisis has different origin. The soaring up index is a government oriented market boost, not a symbol of recovering economy. It’s a