“Barring a radical lifting of restrictions on overseas investment or a sharp increase in deposit rates, China effectively lacks channels for ordinary citizens to generate wealth beyond investment in real estate and stocks.
Real estate is slowing, weighed down by years of accumulated oversupply. It no longer promises the returns it once did. If stocks decline, it is unclear what else ordinary people can rely upon to generate returns.
- Beijing will continue to intervene where possible to prop up markets and market sentiment.
- A collapse of the stock market would likely increase deposits in ordinary bank accounts.
- This would compel Beijing to rely more heavily on banks to fuel growth and pressure China to accelerate financial liberalization efforts as a way to cultivate household consumption.
The Shanghai Composite Index fell 6 percent on July 3, rounding out a 28 percent decline since June 12, when the country’s stock markets peaked. The…
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