by Fons1 via FlickrChina’s planning authorities intend to push up to 400 billion Renminbi into the stock market, but analysts like Arthur Kroeber do not necessarily think that is a good idea. In the China Daily, Kroeber explains why the move, expected early December, might not be a smart idea.
“I don’t think it is useful if the fund is created specifically to support stock prices, as it does not address the structural reasons why the Shanghai market performs poorly,” said Arthur Kroeber, managing director of Beijing-based consultancy Dragonomics…
Kroeber, however, said that if the proposal was to create a long-term fund with an independent investment objective, such as funding pensions, then it could play a role in creating a healthier market.
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….).