“I can’t explain myself, I’m afraid, Sir, because I’m not myself you see.”
~ Alice, from Alice in Wonderland
According to the South China Morning Post (subscription required), the Chinese government has taken to censoring the financial media in effort to stem the floodgates of discontent brewing over dismal market sentiment.
With the craziness of the financial meltdown in the United States, the Shanghai Stock Exchange has followed the rest of the world down the rabbit hole. Within 10 minutes of the opening of the SSE on Tuesday morning, right after the declared bankruptcy of Lehman Brothers, the SSE Composite fell by almost 5% but slowly steeled itself back around the 2000 mark.
The idea of the SSE breaking the 2000 barrier might have seemed impossible this time last year but the stock market has been free-falling, losing more than half its value since January. Frustrations have been mounting despite varied efforts by the regulators to stem the volatility (loan controls, bank reserve rates, administrative fiats, etc). Calls for government intervention have grown louder as fund managers, academics and regulators debate the efficacy and timeliness of a Chinese-styled bailout. The US Federal Reserve’s recent rescue package for Fannie Mae and Freddie Mac, and now insurance AIG have only raised the volume of why-them-not-us, whens and hows among Chinese investors.
SCMP reports that perennial fears of social disunity have led the Communist Party’s Publicity Department (rather than the securities regulator) to verbally inform major financial websites to sift out negative and sensitive commentaries, reports and headlines about the hard-hit markets. There is no paper trail backing up such claims, but editors of online financial media have confirmed them.
Sound familiar? Regulators had warned fund managers not to say anything publicly that could harm the stability of the market weeks before the Summer Olympics. The gag worked only because international financial markets were quiet since half the world was actually in Beijing at the Olympics.
While we do not underestimate the power of censor, it may not work as well this time round. For one, the market doom and gloom is palpable as Asian economies, many of which have tight trade links with China, are tumbling faster than Jack and Jill. China’s capital markets may not be completely open, but some of the problems it has suffered thus far are of its own doing as well. Couple that with twitchy and inexperienced dealers currently panic-selling and a significant portion of Chinese investors who lack proper financial education, a shiny gold-plated band aid is surely not enough to address the roots of the problem.