There were rumors in the middle of August that the Chinese government would not do any more to stop the stock meltdown. The rumors were wrong though because China has done much between then and now. http://money.cnn.com/2015/09/08/investing/china-stock-market-bailout-beijing/index.html What do you think would happen if the Chinese government withdrew its support?
I haven't been following these developments too closely I'm afraid. My opinion based on my limited knowledge about that matter would be that a withdrawal of the Chinese government from its support of the stock market wouldn't be a good thing. Markets are currently still very frail, I think mainly because markets don't have a specific sense of direction at the moment. There's some pockets of excellence in some areas and other areas are still in a lot of trouble. Other parts of the world have found themselves with newfound problems, for example the recessions in Brazil and China. China is the driver of global demand, and a sense of weakness there could drive investors running for the hills. Emerging markets have also seen a healthy amount of cash flow into their economies, if this cash flow dries up too quickly this would negatively affect the growth in these regions immensely. Investors' views on the health of the Chinese economy strongly affect their opinions on the general health of emerging markets. I have always been a fan of the "free market system", but I cannot wholly disagree with the decisions undertaken by the Chinese government. They seem to be doing a lot to prop up their economy and increase the credibility and "stability" of the Chinese markets.
I don't think the Chinese government will withdraw their support because quite simply they can't afford to. No one wants the Chinese economy to collapse especially the Chinese. These are individuals who have several billion people to support, so they are going to help out anyway they can. It would a disaster for the world if the Chinese economy collapsed.
The Chinese government is trying hard to manage an economic and market slowdown in a way that doesn't create social unrest. They've been slowly but surely been trying to shift the focus of economic growth to one that is driven by domestic consumption. In doing so, there were always going to be some growing pains. The probably didn't foresee the extent of the pains but they certainly expected them. Ultimately, though, the government's in it for the long term. Any shorter-term volatility isn't going to shake them from their approach.
I will preface this by saying I don't have a crystal ball. If I did, heck, I'd do better with investments. Jokes aside, my sense is this: the pain in the Chinese market isn't over. It isn't the end, it isn't the beginning of the end, and I have my doubts it is the end of the beginning. Time will tell, of course, but for now, I wouldn't invest in the market any time soon.
