Friday, July 17, 2015

Quick and Deep Thoughts on China's Stock Market

Richard Perry, founder of Perry Capital LLC, shared some thoughts with The Wall Street Journal about China's recent stock market decline and the government's extraordinary efforts to reverse it:
“I think it’s a game, the stock market, personally. They’ve basically closed Macau, and this has become the place to gamble.”
The article doesn't explicitly say so, but it appears Perry did not intend his comment to be a compliment.

Later in the article, another viewpoint is shared:
Eric Mindich, a former Goldman Sachs Group Inc. partner who now runs hedge fund Eton Park Capital Management L.P., said the Chinese authorities had “plenty of ammunition” to keep the good times rolling.
Some people wouldn't necessarily disagree with Mindich, with the caveat that keeping the good times rolling now could mean a bigger price to play later.

These two excerpts succinctly capture the spirit of much of the recent commentary I have seen on China's stock market, or whatever you want to call it now. Big questions about what this all means for China's future remain. In a longer piece, Orville Schell, who also makes use of the gambling analogy, offers an historical perspective on the scope of the uncertainty, which extends beyond China's stock market:
Although we can see a few shadowy outlines of answers emerging as China’s reform odyssey continues, we still do not really know exactly where [President] Xi intends to take the nation. To look into his “Chinese dream” is to see an aspiration for a country that is wealthier, more powerful and better respected. If you look at Xi’s domestic policies it is possible to see an ominously Mao-tinged autocrat whose answer to most problems seems to be more discipline, controls and toughness. But there is little else. And so, because China will almost certainly remain caught between transitions for some time to come, the resolution of crises such as stock market crashes will remain an uncertain and parlous business. The Maoist toolbox into which Xi now seems to reach with increasing frequency when problems occur provides him with few suitable tools for handling many of the complexities of 21st-century economic markets.

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