Na­tion must fol­low own eco­nomic path de­spite pres­sure from trade con­flict, global share rout

Global Times - - BIZCOMMENT - By Hu Wei­jia Page Edi­tor: huwei­[email protected]­al­times.com.cn

Shares in China tum­bled on Thurs­day as the ar­rest of the chief fi­nan­cial of­fi­cer (CFO) of Chi­nese tele­com gi­ant Huawei fur­ther un­der­mined frag­ile mar­ket sen­ti­ment amid con­cerns over the out­look for Sino-US eco­nomic re­la­tions.

The flag­ship Shang­hai Com­pos­ite In­dex fell 1.68 per­cent, while the ChiNext In­dex – the coun­try’s NAS­DAQ-style board track­ing high-growth com­pa­nies – tum­bled 2.61 per­cent. Tech­nol­ogy stocks fared badly in the down­turn, in­clud­ing many Huawei sup­pli­ers and part­ners.

The A-share mar­ket faces the dou­ble pres­sure of eco­nomic dis­putes with the US and uncer­tainty in US stock mar­kets. Ex­perts have warned of a pos­si­ble stock­mar­ket sell-off caused by US tar­iffs, but they haven’t put much im­por­tance on se­vere blows dealt by sud­den in­ci­dents such as the ar­rest.

The trade dis­pute is likely to be­come a pro­tracted one, but there may be sud­den in­ci­dents that de­velop without warn­ing. Those in­ci­dents can push shares sig­nif­i­cantly in one di­rec­tion or an­other, re­sult­ing in great volatil­ity and risk amid frag­ile in­vestor sen­ti­ment.

The trade “truce” be­tween China and the US dis­tracted too many stock mar­ket in­vestors from the real dan­gers of a tough Sino-US re­la­tion­ship, but the facts have proven the mar­ket was too op­ti­mistic. Neg­a­tive ef­fects on the stock mar­ket may con­tinue. The gov­ern­ment needs to take firmer mea­sures to sta­bi­lize the mar­ket and re­store in­vestor con­fi­dence if there is a deep slump in Chi­nese main­land stocks.

China is be­ing forced to take de­fen­sive mea­sures, and the key is­sue now is to firm up in­vestor con­fi­dence, to re­as­sure peo­ple that the gov­ern­ment is ca­pa­ble of keep­ing the stock mar­ket stable de­spite un­ex­pected de­vel­op­ments.

Amid the trade con­flict with the US, China has showed great tol­er­ance and avoided let­ting na­tion­al­ist sen­ti­ment fur­ther worsen eco­nomic ties, but the pub­lic anger is re­ally in­tense. Chi­nese ne­ti­zens on Thurs­day flooded the Chi­nese so­cial me­dia ac­count of the US Em­bassy in China with crit­i­cism over the “shame­less” act of the US re­lated to Huawei. If Wash­ing­ton lets the in­ci­dent con­tinue to fer­ment, global stock mar­ket will suf­fer.

US stocks tum­bled on Tues­day on wor­ries over slow­ing US growth and the trade con­flict. As global mar­kets shud­dered over the ar­rest of Huawei’s CFO, stocks are likely to take a big­ger nose­dive on Wall Street. China must strengthen its fire­wall against con­ta­gion from US eco­nomic uncer­tainty, avoid­ing a rip­ple ef­fect on the stock mar­kets.

Ex­ter­nal in­flu­ences may have an ef­fect, but China must fol­low its own speed and rhythm in eco­nomic de­vel­op­ment. The coun­try must find an in­ter­nal im­pe­tus that drives eco­nomic growth by re­shap­ing its in­dus­trial chain to re­duce its de­pen­dence on US high-tech­nol­ogy prod­ucts.

If the Chi­nese econ­omy and shares can fol­low their own course amid the US sell-off, China will gain greater ini­tia­tive in han­dling is­sues with the US.

The au­thor is a re­porter with the Global Times. bi­zopin­[email protected]­al­times.com.cn

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