The new 2015 Report to Congress from the U.S. China Economic and Security Review Commission is out and it starts with some interesting analysis of how the Chinese dealt with a crisis in their 2015 economy. We deal with these kinds of things all the time and that is why the Fed plays an important role in managing the money supply across our country. China, for all its protestations to the contrary, is not like us.
The Commission report begins by outlining a simple truth: "...the Chinese government responded to the collapse with a heavy hand: ordering brokerages to buy shares, forbidding large shareholders from selling, sending police to root out 'malicious sellers, ordering state-owned companies and pension funds to invest in equities, and halting trading in many companies. The government also censored information, punished journalists for focusing on the bad news, and warned people about spreading 'rumors' about the stock market rout."
The next time someone says Chinese businesses are "just like us", remind them of the kinds of things the Chinese government does to its businesses to make sure things go the way they want. Many government officials wish we could do similar things, but we don't because we are not like them.
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