China’s financial controls appeared to work in the short term, but at the cost of market freedom and credibility.
Bans on selling stocks, capital flight restrictions, and arbitrary arrests have frozen markets and eliminated exit strategies, driving investors and foreign companies away.
2017-08-05
The following is a continuation of the previous chapter.
Amateur economics.
Fukushima.
At the Politburo meeting held in April, there was an unusual call regarding financial security, but this clearly runs counter to financial liberalization.
It means that the Party will intervene more deeply in financial markets.
To put it plainly, it is a warning: anyone who engages in short-selling against the will of the Chinese Communist Party will be arrested, and anyone who invests abroad will be detained.
Such measures inevitably rigidify markets, making any expectation of financial liberalization impossible.
Xi Jinping is moving in a direction where control is more important than economic development, prioritizing the maintenance of the Communist Party system.
Viewed this way, the anti-corruption campaign within the regime can be seen as a shift from a policy of absorbing capitalists into the Party to strengthen it, toward a policy of exclusion.
Xi Jinping is essentially saying that all Party members except himself must remain morally pure.
This amounts to the destruction of the Party’s own middle class.
Yaita.
A group of economic amateurs came together, and Chinese stocks crashed in 2015.
Various policies were introduced at that time, but the most laughable was the ban on selling stocks.
If you can’t sell, then no one will buy them, right?
This completely ignores basic economic principles.
Recently, there has even been a ban on taking foreign currency out of the country.
Fukushima.
They are arresting people who take money out one after another.
Yaita.
Even with gold bullion.
Fukushima.
That’s why it was brought into Japan and caused such a stir.
Yaita.
Japanese companies have become unable to withdraw from China.
Even if they earn money in China, they cannot remit it overseas, leaving them no choice but to reinvest domestically.
In the short term, China appeared to have succeeded, but now no one goes there anymore.
Who would go to a place with no exit, where invested money cannot be taken out?
There is no way that such stopgap policies—devised by amateurs who understand nothing about economics—can succeed.
To be continued.