Stock Market Plunge in China Dents Communist Party’s Stature
BEIJING — Yu Xilin was obsessing on China’s plummeting stock market when he tumbled off his bicycle. But the accident did not sway his focus. While recovering in the hospital on Thursday from surgery for a broken ankle and shoulder, he was using his smartphone to track his shares.
“The government departments that are supposed to be monitoring the stock market aren’t doing their job properly,” Mr. Yu, 55, the director of a provincial cultural exchange office, said by phone from his hospital bed in the northwestern city of Xi’an. “This will affect the image of our leaders. Investors are very upset.”
Even if China’s stock markets end their dizzying falls — and analysts say there is still room to tumble even after a respite on Thursday — the sense of supreme control that once cloaked the Communist Party leadership may take longer to recover.
Across China, many of the millions of middleclass investors have been asking why the party and the government talked up the market in the months leading up to the recent plunge, and then bumbled in their efforts to prevent the rout.
“It’s not only about the falling stock,” said Kerry Brown, director of the China Studies Center at the University of Sydney in Australia. “It’s about the falling political credibility.”
On that score, perhaps no one has taken a bigger hit than President Xi Jinping, who since becoming leader of the Communist Party in late 2012 has meticulously crafted an image of omnipotence.
He has been credited with acting decisively on several issues that include corruption, cybersecurity and Chinese territorial claims in the South China Sea. When earthquakes or other natural calamities hit China, he and the prime minister, Li Keqiang, made reassuring announcements in the state news media or even traveled to disaster sites to demonstrate their calm command.
But since the market began to slide, with the main Shanghai index losing 32 percent of its value over three and a half weeks, the two leaders have been silent on the subject.
Even if regulators reverse the fall, an effort that could in turn distort market forces, the government’s muddled response has raised questions about Mr. Xi’s authority and judgment.
“A middle class that believed deeply that the motherland would become strong has been eviscerated,” said an essay circulating on Chinese websites this week that was credited to an investor who had lost most of his savings. “This was a stock wipeout that thoroughly damaged middle-class assets from a decade of striving. For us, the China Dream really is just a dream.”
The giddiest investors, including those who took on debt to buy stock, are wondering if they can recover their fortunes. Some have posted notices on property rental and sales websites saying they need to sell their homes quickly to raise cash.
Even bystanders who stayed out of the market are asking, if a mere market correction could rattle the government, what might happen during a serious downturn? At stake is not only the stability of China’s economy, but also faith in Mr. Xi and his colleagues.