China Explains Market “Chaos”: You’re Not “Grasping The Rhythm Of The Concept”

As anyone who follows the Politburo’s bevy of mouthpiece “news” outlets knows, Beijing likes to essentially talk about itself in the third person by disseminating what are ostensibly “Op-Eds” on important issues but what, in reality, amount to declarations from the Party.

Needless to say, lots of people are concerned about China’s efforts to squeeze leverage out of the labyrinthine shadow banking complex. We’ve talked at length about this and you can read the latest here and here.

Setting aside the obvious implications for the global credit impulse, the problem with squeezing China’s shadow banks is that there’s really no telling where the credit extended via those channels ended up. Which means that when you turn the screws by tightening…


…and by refusing to roll over maturing liquidity facilities, crazy shit has a habit of just popping up out of the blue in places you might not have expected. So you get things like collapsing iron ore prices or the 5s10s curve inverting.

Well, China wants you to know that they are cognizant of this and to prove it, they wrote something for Xinhua that’s amusingly being attributed to a “reporter” named Xu Sheng.

Of course by far the best thing about China’s efforts to calm people down via Party mouthpieces is that when the posts are Google translated, they are hilarious. 

Here’s Bloomberg’s summary of a piece out Sunday:

  • China should avoid creating new risks when dealing with financial market risks, Xinhua News Agency reports.
  • China shouldn’t be overly eager in handling chaos and risks in financial markets: report
  • Market tension, volatility can’t be completely avoided amid deleveraging and risk prevention: report

So that sounds really dry, right?

Not so fast.

Read the whole piece below in all its Google-translated glory and try not to spit out your coffee…

Via Xinhua

Over the past week, the capital market in the adjustment, supervision in the shot, the CBRC, the SFC, the CIRC and other departments introduced a number of policies. At the same time a concept gradually clear: anti-risk, chaos like a healthy market needs, but not because of the risk of disposal of new risks.

This time, the market adjustment continues, the stock market bond market is not optimistic. Shanghai Composite Index, Shenzhen Component Index fell for 5 consecutive weeks, the GEM index fell for 2 consecutive weeks; 5-year Treasury bond futures contract TF1709 recorded for 5 consecutive weeks fell, 10-year Treasury bond futures contract T1709 for 2 consecutive weeks fell.

There are market views that the continued introduction of regulatory measures caused market tension. If the financial market compared to the lake system, the lake in the water level is reduced, the flow of the channel to the small river is also narrowing, we have some of the future liquidity concerns.

Truthfully, in the background of deleveraging, risk prevention, the market will certainly be nervous, the market volatility is also very difficult to completely avoid. But if the market does not exist in the risk of disposal, not the existence of long-term market chaos governance, it is impossible to form a healthy development of financial markets.

The risk must be anti, chaos must be treated. There is no healthy development of financial markets, financial support for real economic development is an empty talk, and even the country’s financial security can not guarantee.

The chaos of today’s financial markets is not “created” in the short term, and the links between risk points are intricate. Remediation of these chaos, the disposal of these risk points can not be too urgent, from the overall situation, not in the risk of dealing with the risk of new risks.

The market has felt the deleveraging, risk prevention to grasp the rhythm of the concept. China Banking Regulatory Commission on the 12th in the recent supervision of the focus of the work, said to effectively prevent the “risk of dealing with risk” to effectively maintain the stability of the financial sector.

The development of financial markets is inseparable from the regulation, supervision can be better for the development of escort. But a gust of wind, sports regulation is often difficult to achieve the desired regulatory effect. The development of financial markets is not a day of work, supervision can not be a battle and rest, need to consider, coordination, need a long time for the work.


2 thoughts on “China Explains Market “Chaos”: You’re Not “Grasping The Rhythm Of The Concept”

  1. Thanks for your warning on the coffee! Like ‘…the flow of the channel to the small river is also narrowing’, your warning on the coffee narrowed the flow of my coffee spat across the kitchen table.

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