China’s stockmarket rally may hurt the economy

中国股市狂飙

Economist

2025-09-30

7 分钟
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  • Some call it 9/24 for short.

  • On September 24th last year China's officials decided to engineer a rally in the stockmarket.

  • The central bank cut interest rates and bank reserve requirements.

  • It also enabled companies to buy back their shares and institutional investors to leverage their balance-sheets more easily.

  • The markets took the hint.

  • Buy "everything", advised an American hedge-fund manager.

  • A year later, the Shanghai composite,

  • an index of pretty much everything that can be bought on the Shanghai Stock Exchange, is up by about 40%.

  • The rally drew strength in its early stages from the promise of fiscal stimulus and enthusiasm for homegrown artificial intelligence.

  • More recently it has gained momentum from the government's efforts to discourage price wars,

  • which, though good for consumers, are bad for the profits on which shareholders have the final claim.

  • Last month the index exceeded 3,800 for the first time in ten years.

  • But the government's ultimate goal was not merely to revive the market.

  • It hoped the market would help revive the economy, too.

  • Unfortunately, the economy has refused to take the hint.

  • High stock prices can provide a lift to shareholders' paper wealth and morale,

  • which might encourage them to spend—what economists call the "wealth effect".

  • Rich valuations can also give firms the means and the motivation to expand their businesses.

  • On top of this, a buoyant, bustling stockmarket improves the fortunes of the brokers,

  • dealers and banks that handle share purchases and finance them.