Stock Mar­ket Plunge in China Dents Com­mu­nist Party’s Stature

Bhutan Times - - Neighbour -

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.

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