Stock market intervention by Beijing 'could help narrow income gap': Communist Party newspaper
PUBLISHED : Sunday, 04 October, 2015, 11:27pm
UPDATED : Monday, 05 October, 2015, 2:15am
Kwong Man-ki in Beijing
[email protected]
A trader looks up from his work station at the Shanghai Stock Exchange. Photo: Reuters
Beijing's intervention to calm the shaky stock market was necessary and could help narrow the income gap, a commentary in a Communist Party newspaper said on Sunday.
The article, published in Guangming Daily, run by the party's propaganda department, said the intervention, combined with other government measures, was "necessary" to keep household income levels buoyant.
"The intervention can prevent a financial crisis as a result of mounting vulnerabilities in the market and prevent people from losing confidence in financial authorities," it said.
The stock rout, which began in mid-June, prompted Beijing to launch a slew of measures to restore sentiment, including asking companies to buy their own shares, encouraging executives to do the same and suspending initial public offerings.
Some global fund managers said Beijing's measures to shore up the markets would put off foreign investors as the intervention underscored the lack of maturity and liquidity in the mainland capital market.
But the article in Guangming Daily said the steps taken to address the rout were "appropriate" and could help to narrow income disparity.
It said the stimulus package launched by Beijing after the global financial crisis in 2008 to boost household income and private consumption had also had this effect - as had its subsidies to low-income groups and public pensions.
"Recently, there was strong volatility in stock market prices inside the nation, and [to prevent a crisis emerging] the government has taken steps such as asking major shareholders to increase their holding of shares," said the commentary, signed by Huang Zeqing from Renmin University's school of economics.
"The measures can help stabilise share prices, and to a certain extent, narrow the income gap."
The article was the latest voice to defend the series of intervention measures following the stock market slump.
President Xi Jinping defended the government's stock market intervention during his visit to the US last month, saying the market had reached a phase of "self-recovery".
He said the government intervention had contained panic in the market and avoided a systemic risk.
However, mainland investors have taken little comfort from the government's intervention measures.
The benchmark Shanghai Composite Index fell about 30per cent in the third quarter between July and September, as did the Shenzhen Component Index. The mainland stock markets are closed until Thursday for the National Day holidays.
