China Stock Market Faces 4 Day Slump

Despite the government’s claim about China’s soft-landing and the attempts to regulate growth, China’s stock market has experienced a drop for the fourth day in a row. This drop makes the market the lowest in over two years. The Wall Street Journal reports:

China’s Shanghai Composite index was down nearly 2% this morning to 2248.59, its lowest level since March 2009 and its fourth straight decline, on worries about its slowing economy and an export-crimping recession in Europe.

The Shanghai Composite has lagged the S&P 500 consistently since late August, tumbling more than 300 points while the US index has managed (with some ups and downs) to rally nearly 100 points.

The decline in the comes amid a slump in the housing market and the European debt crisis, and there reports that predict that tax cuts will be necessary for to improve economic growth. Bloomberg adds:

Chinese housing transactions declined in 27 out of 35 cities tracked by Soufun Holdings Ltd. during the week of Dec. 5-11, according to the operator of the nation’s biggest real- estate website. Transactions fell more than 60 percent in at least 4 cities, including Tianjin and Hangzhou, it said.

China may use tax cuts to shore up expansion in the second- largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the government’s options. The nation’s top officials are mapping out policies for 2012 at the annual Central Economic Work Conference in Beijing. The event started yesterday, according to the state- run Xinhua News Agency.

“China is no longer able to rely on massive investment in infrastructure building to stimulate the economy,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “Tax cuts are unavoidable.”

The nation’s economic growth may “hit its bottom” in the first and second quarters next year, China Securities Journal reported, citing Ba Shusong, a researcher at the State Council’s Development Research Center. There may be moderate rebound in the third and fourth quarter and growth may be more than 8 percent next year, it said.



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