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��Home>>China Observer
Stock tumble won't affect Chinese macroeconomy
www.chinanews.cn 2007-05-31 17:09:36
Chinanews, Beijing, May 31 �C The Ministry of Finance on Wednesday raised
stock trading stamp tax up to 0.3 percent. The new measure gave a heavy
blow to the surging stock market. On Wednesday, Chinese stock market
index witnessed a 6% drop and trade volume reached 410 billion yuan, a
historical high point. More than 800 stocks dropped by 10%, the largest
drop range within a day. Shanghai stock market dropped by 280 points, the
largest drop since China entered into a bullish market.
Before the Chinese government issued the new regulation, its previous
efforts to cool down the market seemed to have been always in vain, as
more and more Chinese people plunged into the stock market, pushing up
the stock index to go up further.
Since the beginning of this year, experts kept warning about the possible
bubbles in the stock market. The government had also taken various
measures to make sure that the stock index wouldn't go up too quickly. In
order to reach the goal, Chinese government raised the interest rate
twice. However, all these measures seemed to have been responded with an
even more rapid growth in the stock market, although the market might
fall slightly during the early trading hours.
As the new regulation was issued, most economists predict that the stock
market may fluctuate for a while. However, they also say that the large
dive in the stock market won't fundamentally affect the Chinese economy.
The Chinese government regards 4,000 points as an alerting line for the
stock market. With the stock market hitting a new high day by day, most
experts believe that Chinese stock market should make some adjustment
now. So, in the long run, the big tumble on May 30 should be regarded as
beneficial to the long-term development of the market, said Gao Huqing,
an expert from the State Information Center.
He also said that in the long run, the bullish market wouldn't be
fundamentally changed by the new measure.
His point was echoed by Ha Jiming, chief economist at the China
International Capital Corporation Limited. According to Mr. Ha, the stamp
tax raise won��t change the rising trend of the stock market, it being
only aimed at raising the operational costs for short-term profiteers. In
addition, since the total tradable market capitalization in Chinese stock
market accounts for only one-fourth of the national GDP, stock market
tumble won't cause any major negative effects on the Chinese
macroeconomy, Ha said.
The Morgan Stanley investment bank issued a report recently saying that
if the A-share market continues to fall from the current level, its
influence on the Chinese macroeconomy will still be rather limited.
However, it should be noted that the group of people who have just bought
shares ahead of the new regulation will suffer most during this round of
stock tumble. Experts say that the large decrease of market value will
largely affect the life of this group of people.
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