Investors get a reality check in China as stockmarkets fall

The People’s Bank of China, started to remove liquidity from the financial system at the start of this year, driving stock prices down.

The People's Bank Of China In Beijing
The People’s Bank of China has started to drain liquidity from the financial system
(Image credit: © VCG via Getty Images)

China's benchmark CSI 300 stockmarket index soared by 27% in 2020 thanks to the Covid-19-induced stimulus, but the rally peaked in February this year and the index has since tumbled by 13%. It has lost 4% since 1 January.

The main cause is tighter money, as Jacky Wong explains in The Wall Street Journal. The People’s Bank of China, the central bank, turned on the monetary taps last year in response to the virus. Yet with the recovery looking secure, it started to remove some of that liquidity from the financial system at the start of this year. “The spectre of bubbles past still haunt Chinese policy makers”: previous post-crisis stimulus efforts have saddled the financial system with a worrying debt burden. Regulators’ priority is curbing of speculation in property, but tighter credit brings “collateral damage” to stocks.

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Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.