Both the four trillion renminbi (450 billion euro) and the share rescue package of 930 billion Renminbi are not a way to spend China to economic safety, writes assistant-professor Victor Shih in his latest analysis of the country’s financial policies. Most of the four trillion Renminbi will be funded by local budgets and bank loans, they are not extra money from the central government.
Shih’s verdict on the plan to buy back shares of the top-50 listed companies when the index drops under the 1,500 points is even harsher:
it would of course reverse decades of reform, which aimed at making firms more responsible for their own well-being. If the state buys up shares, large firms will simply revert back to state owned enterprises (well of course the US now has plenty of those as well….).