To Save Its Stock Markets, China Is Putting Its Whole Financial System at Risk

Stock prices in China doubled in value over the last year before moving downward, losing 30 percent since mid-June. The country’s leaders struggle to stabilize the markets by cutting interest rates and encouraging large purchases by large brokerages and insurance companies. Rules for buying on margin were loosened. Such interventions may not calm nerves. “In recent days, the Chinese government unfurled a series of measures to stop its stock markets’ free-fall the scale of which has never before been seen,” reports Gwynn Guilford for Quartz. “Not only does the Xi Jinping put threaten to scuttle critical financial reforms; it also leaves China – and untold millions of its residents – in a bigger financial mess than ever.” Global investors are less exposed, but worry about threats to the world’s second-biggest economy. Investors across China borrowed to invest in stocks, and analysts have suggested that government leaders are making a mistake by linking stock-market performance with their own credibility. – YaleGlobal