If you listen carefully, you might hear China’s chickens, making their way home to roost.
The severe volatility in China’s stock markets recently—not the magnitude of the changes in share prices per se, which has happened several times since the advent of the country’s exchanges 25 years ago, but Beijing’s and Chinese citizens’ reactions to them—may well signal the beginning of a fundamental breakdown in the logic of Chinese modern economic reform program, which began in 1978.
In my latest Forbes column—“Do China’s Stock Markets Portend The Chickens Are Finally Coming Home To Roost?”—I argue that the core of the country’s reform approach, encapsulated in Deng Xiaoping’s 1992 pronouncement of the concept of a “socialist market economy”, has been always fraught with inherent contradictions.
Given the extensive rate of growth and the wide diversity of the population’s participation in stock buying over the past decade, is it really a surprise that the Leadership has had little choice but to prop up share values (as it has done in the past)? When a government does this, why even pretend to call these stock markets? This is a loser’s game and has the scent of desperation. At some point, resources will either have been exhausted or they will be taken away.
This illustrates perhaps the most glaring of China’s economic contradictions. But the column details several others. Taken together, Beijing may be thinking about pronouncing: ‘Let them eat cake”.
As always, comments on the Forbes columns are most welcome.