What does market’s ‘Black Monday’ mean?
Bloomberg, editorial: “Monday’s market gyrations highlight one of the biggest worries investors have this year: What would a slump in China mean for the rest of the world? ... China’s leaders are trying to engineer an unprecedented transition to a consumer-driven economy — a shift that will require them to abandon an investment-centric model that has produced rapid growth but also engendered huge debts and excess capacity. One possible outcome is a slowdown that weighs on the global economy for years to come. A scarier possibility is a more virulent financial contagion, as markets panic over losses suffered by the many foreign banks and investors that have piled into China in recent years.”
South China Morning Post, Hong Kong, editorial: “China’s regulators exert a firm control over many things, but the stock market is not one of them. The first day of trading in the new year was labelled ‘Black Monday,’ thanks in no small part to the newly launched circuit breaker, which halted trading in Shenzhen and Shanghai shortly after midday. The disruption has been an embarrassing hiccup. ... Coupled with news of another contraction in the country’s manufacturing sector, the ripple effect was felt by markets around the world. The fiasco is a good example of why Beijing needs to allow market forces to work rather than tightening control.”
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Joe Zhang, Financial Times: “President Xi Jinping ... has begun touting the virtues of supply-side reform. This looks like a sure sign that Beijing has had its fill of stock market tinkering and is turning instead to a watered-down version of Reaganomics. The new policy has two major elements. The first involves making it easier for business to operate by eliminating tedious bureaucracy. The second entails giving the private sector a bigger role in public works projects, which ... have been dominated by notoriously corrupt state-controlled firms. These are good ideas as far as they go. But the government is showing no sense of urgency, and even if it did, such limited measures are not nearly enough. Tax cuts and privatization should also be on the agenda.”
Michael Hiltzik, Los Angeles Times: “Storm clouds have been gathering over stock prices for six months or more. ... If you think the market slumped Monday because investors fretted over China or the Middle East, you may be wrong. How’s that for a firm conclusion?”
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