How China’s Stock Market is Being Manipulated

News & Politics

Introduction

Welcome to the latest installment of our Thursday night livestream. Tonight, we're diving deep into the intricate mechanisms of China's economy, particularly focusing on the manipulation of its stock market. Following our discussion last week about China's population, this week, I began preparing material centered around China's economic landscape, including real estate, exports, and the banking system. However, it has become increasingly clear that the manipulation of the stock market deserves substantial focus.

The Initial Surge

This discussion is a continuation of my last livestream on October 1st, where I elaborated on how the stock market's rapid surge occurred in the wake of a stimulus program announced by the Central Bank on September 24th. The market witnessed a weak rally leading up to the holiday break from October 1st to 7th. During this break, many Chinese citizens actively consolidated their finances, borrowing money in hopes of capitalizing on the perceived bullish market in an otherwise bleak economy. Videos proliferated on Chinese social media, showcasing accounts of ordinary investors turning profits right before the holiday.

To illustrate the fervor surrounding this market excitement, I would like to present a video clip featuring a couple from Shandong province. In it, they share their strategies for investing post-holiday using borrowed money in anticipation of quick profits.

Video Summary:
The husband outlines their plan to buy stocks heavily at the market opening right after the holiday, expecting a significant surge and an opportunity to double their investment for a new car.

Heightened Expectations and Manipulation

This line of thinking is indicative of a broader trend where citizens are willing to gamble their savings on stock market investments in a country where economic hope seems to be scarce. Such erratic behavior raises concerns regarding market manipulation. The government’s proactive approach to facilitate this transition by having banks open early for fund transfers from savings accounts to brokerage firms is demonstrative of a concerted effort to inflate market enthusiasm.

On October 8th, the first day back from holiday trading, the markets initially surged—Shanghai and Shenzhen indices climbed over 10% before crashing back down. The exuberance of retail investors was countered by institutional investors who swiftly began selling off their shares.

The Rollercoaster Aftermath

The results from October 9th starkly contrasted with the previous highs. The Shanghai Composite Index plummeted nearly 7%, marking the biggest single-day drop since February 2020. In total, capital outflows were in excess of 235 billion yuan, with over 95% of stocks witnessing declines.

Investor sentiment turned sour quickly as media reports regurgitated the idea that institutional investors were cashing out while retail investors scrambled to buy shares. The net cash inflow indicated small retailers were purchasing at a loss, while large investors were selling off their holdings.

As we analyze these events, it's evident that the Chinese government is orchestrating the stock market's movement to draw funds from the vast reservoir of savings keeping interests in banks low. This manipulation aims to aid state-owned enterprises at the direct financial risk to retail investors, ultimately leading to losses for those who believe in a robust economic turnaround.

Conclusion

This entire situation reinforces the reality that the Chinese stock market is not a marketplace driven by free market principles but rather a carefully staged platform manipulated by the government and major stakeholders for their benefit while disregarding the financial wellbeing of everyday citizens. The CCP aims to foster a climate of risk-taking among young investors, pushing them further into the stock market without realizing the high stakes involved.

Keywords

  • China's stock market
  • manipulation
  • Central Bank
  • stimulus program
  • retail investors
  • institutional investors
  • market crash
  • investor sentiment

FAQ

Q1: What triggered the recent surge in China's stock market?
A1: The initial surge was largely attributed to a stimulus program announced by the Central Bank on September 24th, leading to a temporary rally in the markets before the October 1st holiday.

Q2: How did retail investors react to the stock market changes?
A2: Retail investors aggressively sought to invest in the stock market using borrowed funds, leading to heightened expectations for quick returns.

Q3: What happened during the first market trading day after the holiday?
A3: On October 8th, the market initially surged over 10% but ultimately settled with the Shanghai Composite up only 4.6%, and the Shenzhen index showed an increase of 8.9%.

Q4: What was the impact of institutional investors on the stock market?
A4: Institutional investors significantly sold off shares, leading to a drastic decline in overall market performance just a day after the initial surge, confirming suspicions of market manipulation.

Q5: How does the government influence the stock market in China?
A5: The Chinese government manipulates the stock market through various mechanisms, including early openings for banks to facilitate investments and orchestrated messaging to encourage retail investment.