-Analysis-
PARIS — China may be a communist country, but if you want to know the mood of the population, you have to look at the stock market. It’s a good indicator of the population’s state of mind, as there were already 160 million stock market accounts at the start of the year, and several million more in the past few weeks, thanks to a wave of market madness.
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The reason everyone is watching stock prices is that there is a deep malaise in China today. And it’s as political as it is economic. Since the turn of the century, the Chinese have enjoyed a long period of optimism to match the double-digit growth of their economy in the 2000s; then came the time of doubt.
Since COVID-19 and its unnecessarily brutal and prolonged confinement, doubt has given way to mistrust. This has been exacerbated by the violent crisis in the property sector, which is central to the lives of many families, and by the massive unemployment among young graduates. These shortcomings have called into question whole areas of the social contract, creating a real crisis of confidence in Xi Jinping, the all-powerful leader of the Chinese Communist Party.
Stock market goes wild
At the end of September, Beijing announced a massive economic stimulus plan. The Chinese had been waiting months for this amid the slowdown: it’s the classic remedy, to which China has resorted several times in the past.
The effect on the stock markets was immediate: +25% in a few days, after four years of decline. Then the Shanghai Stock Exchange closed for the weeklong National Day holiday and did not reopen until Wednesday: It immediately gained a further 10%, pending details of the government measures. But the public was disappointed, and the rise was more limited.
Xi’s obsession is to prepare China for the major confrontation with the United States.
What this stock market mania says is first and foremost the volatility of public confidence. For Xi, this is a major political issue.
China’s leader has gradually consolidated all power in his own hands; he has tightened political control and surveillance of the population; he has favored the state economy at the expense of the private sector. His sole obsession is to prepare China for the major confrontation with the United States that he considers inevitable.
Unhappy households
The country’s wealthiest have gradually taken the path of exile, to Tokyo or Singapore, while thousands of young graduates have tried to emigrate to the United States via the perilous route of Central America.
With its stimulus plan, the Chinese government has tried to win back the confidence of families, who are sitting on a mattress of savings and are afraid to spend it due to lack of confidence. The promised stimulus has channeled some of these savings into the stock market, but experts doubt that the Chinese economy will quickly emerge from its slump.
The events of the last few weeks will be analyzed closely: the stock market as a barometer of confidence in a communist country is not the least of China’s paradoxes; even Xi will find it food for thought about the exercise of state power.
