SHANGHAI- China’s securities regulator chief said they will make stable capital market operations a top priority amid deepening worries about the economic outlook and fluctuations in stocks.
The world’s second-largest economy slowed sharply in the second quarter, due to widespread COVID-19 lockdowns and a slumping property sector.
The benchmark CSI 300 Index dropped for four straight weeks last month, while foreign investors sold 21 billion yuan ($3.1 billion) in Chinese stocks via the stock connect scheme, snapping three consecutive months of inflows.
“It is a rule that the stock market has ups and downs, and the government should not intervene in normal fluctuations,” wrote Yi Huiman, chairman of China Securities Regulatory Commission (CSRC) in Qiushi, an official journal of the Chinese Communist Party, published on Monday.
“However, non-intervention is not laissez-faire – we must always adhere to the bottom-line mentality and resolutely prevent ‘market failure’ from causing abnormal fluctuations.”
Yi said capital markets were a “barometer” of a country’s economy, reflecting expectations and confidence, which made maintaining their stable and healthy development important.
He added the regulator would strengthen coordination with macroeconomic management departments and industry authorities to maintain consistent policy expectations and resolve property developers’ risks.
He also said China has met conditions to fully implement a registration-based IPO system and that the regulator would ensure the smooth implementation of this reform.
The CSRC will accelerate the implementation of rules for offshore listings and support the offshore listing of various types of enterprises, Yi added.
Meanwhile, China’s commitment to restructure the $6 billion it is owed by Zambia is a good sign for Sri Lanka and others that have borrowed heavily from Beijing. In April, the People’s Republic joined the African country’s creditor committee. That group it co-chairs with France has yet to detail how large any haircuts will be, but the initial agreement is an important step forward in setting a new model for emerging-market debt relief.
Unlike Zambia, Sri Lanka was not poor enough earlier to be covered by a G20 initiative that suspended $13 billion in debt service payments for some 50 countries through the pandemic. That framework was the basis for China’s change of tack on Zambia prompting it to effectively join the Paris Club in all but name.
Yet China will struggle to draw such arbitrary boundaries around its lending losses: Sri Lanka’s $14 billion of foreign bonds trade for as little as 28 cents, half the level of Zambia’s $3 billion of paper. Both are in default. Both need urgent relief. Zambia’s fix will lead the way for a new band of emerging market creditors including India and Saudi Arabia who have grown significantly in the last decade.
