The Chinese stock market has been in freefall for several days and more than half of the listed companies have suspended trading in their stock. By Tuesday, the market had lost US$6.5 trillion in value, 17 times Greece’s GDP, and it is still falling. Rather than the Greek financial crisis, it is the Chinese stock market disaster that poses the biggest economic threat to the world.
What has caused this fall? The Chinese economy has experienced high growth for several years, and as the People’s Bank of China has lowered interest rates and relaxed capital controls, a capital bubble has formed. When the growth rate slows, there will be an unstoppable chain effect. The Chinese government is trying to save the market through intervention, and the central bank has lowered interest rates, the reserve requirement ratio and the reverse repo rate, all to no avail.
China’s Securities and Futures Commission last weekend issued repeated signals that it would rescue the market, and 21 securities firms entered the market in a net asset position, but investors saw through the government’s attempt to save the market and took advantage of the situation, making a profit and then pulling out, and the market continued to fall. There is now a risk that a capital outflow crisis could lead to a financial crisis.
China’s economic system is affected by its opaque political system, and there is a lack of public trust. The Chinese economy is not doing as well as it used to, but it is still not doing too badly. Despite that, a wealth of conspiracy theories have caused public trust to collapse.
China’s has always been a centrally planned economy, and the government has always manipulated the market. The scale of the market has now expanded and market factors have become more complex, with the result that government intervention is not as astute as it was. The government sees the fortunes of the stock market as its own responsibility and thinks it can turn the tide on its own, but the government is clearly incapable of outsmarting the market.
The Chinese economy’s slowing growth rate is an unavoidable trend. Beijing forecast a growth rate for this year of 7 percent and has said that the growth rate will drop to 5 percent within 10 years. This period of falling growth will be accompanied by adaptation and the creation of a legal framework formalizing the economic system and deregulation measures, but the government still lags behind and if the slowing growth gets out of control, the economic slowdown will be even more precipitous.
Taiwan is the nation that is most economically dependent on China in the world today, and the Chinese stock market disaster will have a direct impact on Taiwanese investments in China. The damage to the Chinese market will also have a massive impact on Taiwanese imports and exports. As the Chinese economy sickens, the global economy will catch a cold, but the Taiwanese economy will catch a fever.
Taiwan has long been dependent on China’s development and neglected its international expansion. Now that China itself is alert to its slowing domestic economy and is turning to its “one belt, one road” strategy to create a wider regional market, there is even less reason for Taiwan to place all its eggs in the Chinese basket. The Chinese stock market disaster is a crisis, but it also offers Taiwan a good opportunity to increase its efforts to join the Trans-Pacific Partnership and other international trade frameworks.
Chinese Nationalist Party (KMT) caucus whip Fu Kun-chi (傅?萁) has caused havoc with his attempts to overturn the democratic and constitutional order in the legislature. If we look at this devolution from the context of a transition to democracy from authoritarianism in a culturally Chinese sense — that of zhonghua (中華) — then we are playing witness to a servile spirit from a millennia-old form of totalitarianism that is intent on damaging the nation’s hard-won democracy. This servile spirit is ingrained in Chinese culture. About a century ago, Chinese satirist and author Lu Xun (魯迅) saw through the servile nature of
In their New York Times bestseller How Democracies Die, Harvard political scientists Steven Levitsky and Daniel Ziblatt said that democracies today “may die at the hands not of generals but of elected leaders. Many government efforts to subvert democracy are ‘legal,’ in the sense that they are approved by the legislature or accepted by the courts. They may even be portrayed as efforts to improve democracy — making the judiciary more efficient, combating corruption, or cleaning up the electoral process.” Moreover, the two authors observe that those who denounce such legal threats to democracy are often “dismissed as exaggerating or
Monday was the 37th anniversary of former president Chiang Ching-kuo’s (蔣經國) death. Chiang — a son of former president Chiang Kai-shek (蔣介石), who had implemented party-state rule and martial law in Taiwan — has a complicated legacy. Whether one looks at his time in power in a positive or negative light depends very much on who they are, and what their relationship with the Chinese Nationalist Party (KMT) is. Although toward the end of his life Chiang Ching-kuo lifted martial law and steered Taiwan onto the path of democratization, these changes were forced upon him by internal and external pressures,
The Chinese Nationalist Party (KMT) caucus in the Legislative Yuan has made an internal decision to freeze NT$1.8 billion (US$54.7 million) of the indigenous submarine project’s NT$2 billion budget. This means that up to 90 percent of the budget cannot be utilized. It would only be accessible if the legislature agrees to lift the freeze sometime in the future. However, for Taiwan to construct its own submarines, it must rely on foreign support for several key pieces of equipment and technology. These foreign supporters would also be forced to endure significant pressure, infiltration and influence from Beijing. In other words,
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