{"id":186436,"date":"2015-08-25T00:48:21","date_gmt":"2015-08-25T07:48:21","guid":{"rendered":"http:\/\/chinadigitaltimes.net\/?p=186436"},"modified":"2015-08-25T00:51:01","modified_gmt":"2015-08-25T07:51:01","slug":"will-stock-market-crash-threaten-xis-credibility","status":"publish","type":"post","link":"https:\/\/chinadigitaltimes.net\/2015\/08\/will-stock-market-crash-threaten-xis-credibility\/","title":{"rendered":"Will Stock Market Crash Threaten Xi\u2019s Credibility?"},"content":{"rendered":"

While China’s stock markets plunged in June, the government took a number of steps to actively intervene and stop the slide<\/a>. On Monday, China shares dropped 9%, with ripple effects quickly felt across the globe<\/a>, and the slide continued Tuesday morning<\/a>. So far, the government has not responded as aggressively this time, as some question whether Xi Jinping is equipped to manage the Chinese economy and whether too much attention has been focused on the fight against corruption<\/a> at the expense of the country’s financial management. Before Monday’s crash, Michael Forsythe and Jonathan Ansfield of the New York Times wrote<\/strong><\/a>:<\/p>\n

Mr. Xi has positioned himself as the chief architect of economic policy \u2014 usually the prime minister\u2019s job \u2014 and has vowed to reshape the economy, exposing himself to blame if growth continues to sputter. At the same time, Mr. Xi is making enemies with an anticorruption drive that has taken down some of the most powerful men in the country and sidelined more than a hundred thousand lower-ranking officials.<\/p>\n

Senior party officials are said to be alarmed by the state of the economy, which grew at the slowest pace in a quarter century during the first half of the year, and now seems to be decelerating further. In a sign of its anxiety, the leadership this month implemented the biggest devaluation of the Chinese currency in more than two decades, sending global markets into plunges.<\/p>\n

Mr. Xi\u2019s reputation was also dented this summer by panicked official efforts to prop up the Chinese stock market after a sharp dive in share prices. His government had promoted the market as a good investment to the public for months.<\/p>\n

[…] \u201cEveryone understands that the economy is the biggest pillar of the Chinese government\u2019s legitimacy to govern and win over popular sentiment,\u201d said Chen Jieren, a well-known Beijing-based commentator on politics. \u201cIf the economy falters, the political power of the Chinese Communist Party will be confronted with more real challenges, social stability in China will be endangered tremendously, and Xi Jinping\u2019s administration will suffer even more criticism.\u201d [Source<\/strong><\/a>]<\/p><\/blockquote>\n

Likewise, in Slate, Joshua Keating writes about the confluence of stock market woes with global tensions of which China is at the center<\/strong><\/a>:<\/p>\n

These ongoing tensions are worrying enough in normal times, but are even more dangerous when China\u2019s leaders feel insecure and challenged by domestic enemies. Which is how they must feel right now. The economic turmoil of the past few weeks has dealt a blow to the image of China\u2019s leaders as competent stewards of the country\u2019s economic rise, and President Xi Jinping looks powerless in the face of economic forces. Reports are already emerging about grumbling within senior ranks of the Communist Party over whether Xi and his advisers are up to the task of managing China\u2019s next economic transition. If Xi feels threatened by a lack of support at home, he could ramp up his purge of potential rivals.<\/p>\n

The bigger fear if there\u2019s a long-turn economic downturn is social instability. Under the country\u2019s unspoken post-Tiananmen grand bargain, China\u2019s population hasn\u2019t significantly challenged the autocratic one-party state, so long as the party continues to deliver economic progress and increasing prosperity. This is not to say that Chinese society is entirely harmonious\u2014while the authorities have been adept at managing dissent, the country still sees tens of thousands of \u201cmass incidents\u201d every year, sparked by causes ranging from labor disputes, to environmental degradation, to land seizures. But thanks to steady growth, public anger over economic conditions hasn\u2019t been a major problem over the last 25 years. It could be soon: Chinese investors, who were strongly encouraged by the state-run media to put money in the market during the country\u2019s boom, are already venting their anger online. [Source<\/strong><\/a>]<\/p><\/blockquote>\n

China’s geopolitical role is currently in the spotlight as the country prepares for a major military parade to mark the end of World War II<\/a> and to showcase Beijing’s power. But the economic troubles threaten to sideline China’s achievements in recent decades. Fergus Ryan reports in The Guardian<\/strong><\/a>:<\/p>\n

The V-Day celebrations, due to occur on 3 September, are designed to be a showcase of Xi\u2019s power and credibility and are clearly aimed at a domestic audience. But increasingly, when it comes to the economy, his and the government\u2019s credibility are taking a hammering. Beijing\u2019s reputation as skilful and competent economic managers \u2013 built up over years of breakneck economic growth \u2013 is in tatters after a two-month long stock market rescue operation has faltered.<\/p>\n

More so than anywhere else, China\u2019s stock market is disconnected from the economic fundamentals of the country, experts say, but nonetheless the rapid decline shows that market sentiment has fallen off a cliff.<\/p>\n

\u201cIt is a key moment for China. The equity market in freefall, the banking system increasingly starved of liquidity, rising capital outflows, and a rapidly slowing economy,\u201d Angus Nicholson, of IG Group, wrote in a note on Monday.<\/p>\n

Global markets were already reeling from last week\u2019s data, which showed the country\u2019s manufacturing output had dipped to its lowest point since the global economic crisis. Experts say there\u2019s a sense that it no longer matters what the government says or does, as the market is now adjusting to what it believes the reality is. [Source<\/strong><\/a>]\n<\/p><\/blockquote>\n

Authorities have attempted to manage the response to the stock market crash by censoring news and social media posts. Propaganda officials have issued directives to the media on how to report the news, according to the South China Morning Post’s George Chen:<\/p>\n

\n

BREAKING: Chinese authorities issued notice to state media to censor negative market reports following #BlackMonday<\/a> pic.twitter.com\/hQ6vbksYtw<\/a><\/p>\n

— George Chen (@george_chen) August 24, 2015<\/a><\/p><\/blockquote>\n