Last summer, China unleashed an unprecedented array of measures - up to and including the arrest of "malicious short sellers" and prominent hedge fund managers - to prevent its stock market bubble from bursting. It failed. A few months later, the chaos has spilled over from the relative containment of the capital markets and has engulfed not only the country's FX reserves, and capital account, but also the entire economy.
As a result, China’s government has gone all in, stepping up efforts to ward off a potential financial crisis. Expect many more actions and interventions over the coming months, all of which like last year, will be self-defeating as the harder China presses on its porous "capital" firewall, the more holes that will emerge.
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