BEIJING, January 7. /Corr. Alexey Selishev/. The depreciation of the yuan to the dollar, which caused the collapse of the stock market by more than 7% caused by the massive withdrawal of speculative capital out of the country. This opinion is shared by the interviewed experts.
“According to my calculations, on the Chinese financial market has until recently been applied to $1 trillion, which was used to carry out speculative transactions. As rising costs of Chinese economy, the deceleration in GDP growth rates and improving the Federal reserve system (FRS) the USA of discount rate, the profit from the speculative trading sharply declined, which led to mass conversion of the yuan into dollars,” – says Professor at the Institute of international relations Renmin University of China Bao Csanion.
Trading on Chinese stock exchanges stopped after falling of indexes more than on 7%
As explained by the expert from the China center for international economic exchanges, Wang Jun, speculative capital began to penetrate into the Chinese market for almost 20 years. “On the one hand, in those days the rate of growth of the Chinese economy has exceeded 10% per year, which created good possibilities for carrying out short-term speculative operations. On the other, for many years China is a net exporter of goods, which also contributed to the strengthening of the Renminbi against the dollar,” he said.
In this case analyst investment Bank Guotai Junan Securities Zhou Leewan said that we should not forget that, since 2009, the PRC government has been strengthening the yuan to fight inflation, which has also become an important factor in the appreciation of the yuan and the growing interest of speculators to the Chinese currency. “All this has led to the fact that in the period from 2010 to 2013 the average yield of the investment companies in China amounted to about 20%. However, the situation has changed and now we are seeing the outflow of speculative capital,” the analyst believes.
Trading on the stock exchanges of mainland China on Thursday were stopped less than half an hour after opening due to strong drop in prices. The Shanghai Composite index, reflecting the situation on the Shanghai stock exchange, lost 7,32%, obvalivat to 3115,89 item. The Shenzhen Component index, which is the main indicator of business activity on the trading floor in Shenzhen, fell by 8.35 per cent to 10745,47 item.
The cause of panic among investors was the decrease in the Central Bank official rate of the Chinese currency to its lowest since August 2015 value in 6,5646 yuan for one dollar.