Beijing’s failure to bolster consumer confidence risks triggering a major crisis in its huge, opaque shadow banking sector.
It’s a worrying sign when even the Chinese sharemarket investors – who are prone to rapid-fire and exuberant responses to Beijing’s latest policy initiatives – becomes sceptical of efforts to bolster investor confidence.But that’s what happened on Monday, after Chinese authorities slashed the stamp duty on sharemarket transactions. After initially jumping 5.
But Beijing’s reluctance to introduce major structural shifts in the Chinese economy is exacerbating the likelihood of contagion from the country’s worsening property slump to its large and opaque shadow banking sector. If investors decide to withdraw their savings from investment products when they mature, an increasing number of trust companies will fail to make payments. And this will further erode confidence in China’s shadow banking system.At the same time, investors have been disappointed by the Chinese central bank’s cautious approach to cutting interest rates to spur economic activity.
Chinese youth unemployment rate has doubled in the past four years, hitting a record 21.3 per cent in June. In response, the Chinese government decided to suspend the release of the figures. It’s also a way of expressing their rejection of the work culture of their parents’ generation, and of demanding more meaning in their jobs. After all, what is the point of working exhausting hours when the economic outlook is bleak, and wages are stagnant.
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