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Stable Chinese stock market good for world

Updated: 2015-07-24 07:51
(China Daily)

Stable Chinese stock market good for world

An investor smiles at a bourse in Huaibei city, East China's Anhui province, July 23, 2015. [Photo/IC]

With the benchmark Shanghai Composite Index successfully leveling off above 4,000 points nowadays after plummeting more than 30 percent in weeks, the Chinese authorities have seemingly succeeded in shoring up investors' confidence.

The fact that China's trillion-dollar securities market has stopped hemorrhaging speaks volumes about China's capability and determination to maintain the market's healthy development.

At a time when the global economy is witnessing its slowest growth rate since the 2008 global financial crisis and Chinese economic growth is catching wide attention, the decisiveness of the Chinese authorities in taking all means possible to stop the spread of stock market risks has been invaluable.

If the irrational dive in share prices had not been halted, the resulting panic would not only have created havoc in the stock market but also applied the brakes to the ongoing transformation of the Chinese economy.

Tens of millions of retail investors would have suffered huge losses from sharp irrational drops in share prices, while the further spread of market risks could have triggered systemic danger in the monetary institutions.

Moreover, the fast-spreading pessimism from the depressed stock market would have dealt a heavy blow to the healthy growth of China's real economy.

As the world holds its breath over Greece struggling out of its debt crisis, a runaway fall in the Chinese stock market valued at 10 times the total Greek gross domestic product would have led to undesirable consequences.

More importantly, the fragile global recovery has to survive the tremendous uncertainty that the United States' looming rise in interest rates will bring about. The international community should feel relieved that the Chinese authorities have quickly stepped in to prevent systemic risks at home and add certainty to the global economy.

The initial stabilization of the Shanghai and Shenzhen stock markets has fully justified the decision by China to press the risk management button and proven China's determination and capability in financial governance. The solid progress over the couple of weeks has also showcased the vitality and validity of the world's second-largest economy and its financial system.

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