How Xi Jinping is taking control of China’s stock market

email rounding up the latestWhen Jilin Joinature Polymer made its debut on the Shanghai Stock Exchange on September 20, it became the 200th company to float on China’s domestic markets this year. Collectively they have raised over $40bn, more than double the amount raised on Wall Street and almost half the global total.

You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser. Nor is there any guarantee that convincing China’s IPO investors to enthusiastically back new listings, or leaning on large asset managers and insurers to become long-term investors in chipmakers or electric-vehicle manufacturers, will result in the kind of job and wealth creation for ordinary Chinese that property and infrastructure investment previously did.

Noble says high-profile references to this “new whole-nation system” in Xi’s speeches and articles published in top Communist party journals were “clearly blinking signals that this is a big priority . . . and very important in terms of what China’s science and technology future will look like.” The nationwide “registration based” listings system, rolled out in February, made China’s formal process for stock market listings more transparent and ended an often lengthy process of official vetting by the China Securities Regulatory Commission for every IPO application.

“Keeping these investors locked in for longer keeps share prices stable,” says Xia Mi’ang an analyst with Pacific Securities. “It will push listed companies to focus on improving profitability, and make [IPO] investors bear investment risks while letting them enjoy dividend returns.” You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.

“They’re listing the firms and they’re making them attractive because they have government subsidies or enjoy low taxes,” says Thomas Gatley, an analyst at Gavekal Dragonomics. “The strategy is market driven, but not fully market driven — the government’s thumb is on the scale.”Not everyone is thrilled by the enhanced role of the state in China’s stock markets.

Now, as foreign funds are dumping their holdings, traders and strategists say China’s “national team” of state-run investors is busy buying in as part of an effort to prevent a more serious market rout. “Rather than changing market expectations through altering supply or demand, [policymakers] are guiding buy-and-hold funds into the market . . . which cannot work in the long term,” says an investment banker at one of China’s largest brokers.

Even if the disruption to China’s stock markets eventually fades and policymakers’ plan to transition to a consumer-focused economy powered by heavy investment in companies that serve Xi’s policy priorities succeeds, there are reasons to question whether the results will live up to his vision.

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