Shanghai Stock Exchange .
Originally opened within the decade, the Shanghai stock market (SSE) was stop working by the party in 1949. In 1990, the exchange opened once more, first appearance a brand new age for the Chinese economy, one publicised by wild swings, with each market run-ups and crashes.
Unlike different stock exchanges round the world, the point operates as a noncommercial organization. It’s administered by the CSRC (China Securities regulative Commission), and is vulnerable to excessive government oversight. Most of the key firms listed during this exchange wont to be state-run firms, together with insurance firms and banks.
In order to qualify for listing on the point, an organization should be in business and earn profits for a minimum of 3 years.
The SSE, that is that the largest stock market operational in China, lists 2 differing kinds of shares: A shares and B shares. A shares square measure quoted solely in Chinese currency, the yuan.
They represent stock in firms supported the Chinese Terra firma. till fairly recently, solely voters of Communist China might obtain A shares. However, approved foreign investors, selected as QFII (qualified foreign institutional investors) square measure currently allowed to buy them through a special extremely regulated system. B shares square measure hospitable each foreign and domestic investors, and these shares square measure quoted in different currencies, like U.S. dollars. each stock on the point trades in each A and B shares.
The main index chase the Shanghai stock market is that the point Composite. This live is anticipated to mirror the general Chinese economy as additional state-run firms go public. In 2015, the point cycled through majestic highs and painful lows, displaying extreme volatility despite centered government intervention. One reason for those terribly wide swings was the very high proportion of margin commercialism (when investors borrow against their holdings to shop for shares on credit), that concerned trillions of yuan (Chinese currency).
Another reason was the serious hand of the Chinese government, that exercised its power at the same time as it tried to supply freer access to foreign institutional investors.
Companies listed on the Shanghai stock market embody Air China, Bank of China, PetroChina, and Tarkington distillery. although some inroads are created that enable sure foreign investors to shop for Chinese stocks, individual foreign investors will additional simply invest in these shares victimization the stock market of port.
Shanghai Stock Exchange collapse
The financial storm that hit the Chinese markets during the month of August is not the result of chance or a passing cloud. Rather, it is the result of accumulations in political, economic, monetary and financial performance with the aim of changing the course of the economy from relying on the external market to relying on the internal market in an experiment that China was keen to adopt from During reforms announced in 2009.
The Chinese authorities wanted to reduce dependence on exports as a major element to support the national economy, the second in the world after the American economy and its first competitor, and to support the internal consumption component in addition to the export policy. However, it seems that this strategy did not succeed to the level that the authorities had hoped.
After 15 years of focusing on exports with a low exchange rate for the national currency that contributed to strengthening exports and consequently a fantastic rise in revenues, the Chinese economy was able to cross the ten percent threshold as a growth rate. During this period, i.e. between the late nineties and the end of 2011, China was subjected to sharp criticism from the Americans, and the American financial and trade authorities demanded it to raise the value of the Chinese national currency in order to achieve a balance in commercial transactions, as Chinese products invaded the American market to a large extent. Indeed, since 2006, China has raised the value of the currency, but at timid rates that did not make the Americans happy and did not harm Chinese exports at the same time.
And we should not forget that the Chinese economy benefited greatly and indirectly from the American real estate and financial crisis between 2008 and 2010 (Supbrimes), as it was able to make investments in the West at a time when the entire economies of Europe and the United States were damaged during this crisis.
In front of the huge volumes of liquidity enjoyed by the Chinese markets, the movement of internal investments has been intensely active, especially in the field of real estate and construction, to the extent that signs of a real estate bubble are beginning to appear clearly on the horizon.
In conjunction with these developments, the authorities decided to activate and strengthen the internal consumer market by subsidizing loans and pumping more liquidity with the aim of moving the second engine of the national economy, which is consumption, in addition to tempting local customers to reinvest in internal projects through the use of their bank savings.
Here, it is worth saying that the government can impose procedures related to projects and the terms of bank credit on customers, but it cannot impose on these customers a specific lifestyle and force them to consume at levels it desires.
Consequently, the economic policy did not reach its goal during the past five years, and the economy has become stagnant after the growth rate fell from more than 10 percent to around 7 percent, forcing the authorities to take monetary measures during the summer of 2015 and decided to reduce the national currency again. To support the export engine. But this decision does not mean that the authorities have abandoned their goal of moving forward in support of the consumption model to support the national economy, which in the event of its collapse, other global economies will collapse with it, and this is what we witnessed last August and its repercussions may not stop there.
Between the period of August 17-25, 2015, the Chinese financial markets experienced their worst performance stages and lost within a week 25 percent of the value of the market exchanges, and dragged with them most of the stock exchanges of Asia, Europe and the United States to levels that are indispensable, at a time when the latter is in the exit stage. From the bottleneck after continuing American and European crises since 2008, and this collapse in the Shanghai Stock Exchange was a reaction to the decline in the Chinese economic wheel, and thus as a reaction to the authorities’ recent decision to devalue the (yuan) currency to support exports, which was explained by investors that the decision The Chinese policy on the currency exchange rate is to announce a failure in the authorities' ability to find answers to the crises that present themselves in the internal financial and economic arena.
24 August 2015:
Chinese Financial Monday - Global Black
In fact, the features of the slowdown in performance in the Chinese stock exchanges began to become clear since the beginning of the summer and continued in this way until the indices fell violently in the trading of Monday, August 24, 2015 and continued for a period of days.
The reaction of other Asian and Western financial markets in general is very natural, firstly because of the interrelationship between markets and dealing in stocks, and secondly because the Chinese money market is the cause of an unprecedented decline of its kind for the second economy in the world and the largest partner that is sweeping the world’s markets with its cheap goods due to the low exchange rate of the currency.
After a period of months between October 2014 and April 2015, the Shanghai Stock Exchange witnessed a remarkable increase of 150%. It was natural, as is the case in all economies of the world, that things ended in a bubble and a selling wave, but this time the dealers erred by focusing on the Chinese financial market In this large volume of turnout and dealing, while the signs of weakness in the Chinese economy were clear and were not hidden from one of the series of reforms that China has initiated, which is supposed to be an incentive for dealers to monitor what will happen, especially since the slowdown The Chinese economy is taking place at a time when the economies of the West, the first partner of the Chinese market, have not yet recovered.
After the heyday, when the Chinese economy experienced a growth rate that ranged between 10 percent and 11 percent, the latter fell to about 7 percent, with the Chinese authorities adopting the experience of the internal market as an engine of the economy, not exports, with a population density of more than one billion people. But the scheme is one thing and the reality is something else. Today, the Chinese economy represents 15 percent of the world’s gross domestic product, and the possibility of its decline comes with the decline in internal economic growth, and therefore, this decline will directly affect the global economy.
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