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Xi Jinping’s Bull Market

Apr 18 , 2015

The Chinese economy continues to slow, as first-quarter figures released Wednesday show. Yet stock prices are soaring. The Shanghai market’s main index rose 2.7% on Thursday to a seven-year high, and is up about 90% since last August. So what’s going on?

In China it pays to follow the politics first, and then the money. Communist Party media from the People’s Daily on down started talking up the stock market last summer, and the government loosened restrictions on stock buying. But several motivations underpin the leadership’s consensus in favor of a bull market.

Economic reformers want to develop the market into a real mechanism for allocating capital to entrepreneurs, instead of a venue for state-owned enterprises and scammers. The doors have been opened for initial public offerings, and a rising market is needed to draw in investors.

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