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Black Friday: Chinese stock market plummets by 1.5 trillion pounds in three weeks

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shanghai-Composite

By NewsGram Staff Writer

Even as the debt crisis continues to devour Greece, a financial catastrophe is wreaking havoc in the other part of the world.

In the preceding three weeks, the Chinese stock market has lost value equivalent to a jaw dropping £1.5 trillion —an amount that is almost 10 times the size of Greece’s annual GDP.

The epic fall marks the worst three weeks for Chinese stock markets since 1992.

Following a record breaking eight month period during which it reached its peak on June 12,  the Shanghai Composite, an index of all stocks traded on the Chinese stock exchange, has fallen 30 per cent.

The third straight ‘Black Friday’ has seen the market crash by 3.25 per cent, falling below 4,000 for the first time since April.

Keeping in the mind the precipitous fall, China’s financial regulator has said it will investigate for suspected market manipulation.

The abnormal market movements from stock market and futures exchanges–including allegations that some overseas investors are driving prices down by short-selling Chinese stocks–will be investigated by the China Securities Regulatory Commission market (CSRC).

The China Financial Futures Exchange (CFFEX) has already suspended 19 accounts from short-selling for a month, a Reuters report noted.

Another probable reason for the sudden downfall could be the massive overvaluation of the Chinese markets, having inflated by 150 per cent in just one year.

“Shanghai’s benchmark index is expected to fall by a further 2-30 per cent over the next year”, said a Morgan Stanley senior analyst while claiming this to be the end of a cycle of growth.

Global Times, Chinese newspaper denied blaming foreign investors for the rapid fall.

“Foreign capital has only a small part of the Chinese stock market. Large-scale short selling by foreign investors in the Chinese stock market has not appeared and is an unlikely scenario”, the newspaper said.

Meanwhile, in response to the drop in the Shanghai Composite, the government has cut the cost of borrowing and eased margin lending rules, encouraging brokerages to lend money.

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China’s renminbi weakens

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Beijing: The central parity rate of the Chinese currency, the renminbi (yuan) weakened by 137 basis points to 6.5169 against the US dollar on Tuesday, according to the China Foreign Exchange Trading System.

The yuan hit its lowest level in more than four years in both onshore and offshore trade on Monday, as bad news about the country’s manufacturing activity unnerved investors, Xinhua reported.

The Caixin General China Manufacturing Purchasing Managers’ Index (PMI), an indicator of manufacturing activity, edged down to 48.2 in December from November’s 48.6 percent. The reading was the lowest since September.

A reading above 50 indicates expansion while a reading below 50 represents contraction.

The yuan has largely been trending down since China’s central bank revamped its foreign exchange mechanism last August to make the currency more market-based.

The yuan has been losing ground as the Chinese economy hit its slowest pace in a quarter century due to outstanding issues such as housing overhang and excess capacity.

Meanwhile, the US raised its interest rates in December and more hikes are expected in 2016.

The PBOC said in August that there is no basis for steady depreciation of the yuan. (IANS), (image courtesy: fortunedotcom.files.wordpress.com)

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Modi may become a Nixon-like statesman, says China daily

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India's PM Modi is greeted by supporters after arriving at Vancouver International Airport in Richmond

By NewsGram Staff Writer

An article in a leading state-run newspaper of China, the Global Times, linked the Indian Prime Minister Narendra Modi to former US president Richard Nixon. The article stated that Modi’s China visit could become an ice- breaking visit, just like Nixon’s 1972 visit. The English daily also stated that Modi has the capacity to resolve the issues between the two Asian countries.

Nixon’s visit was considered an important step in normalizing relations between the US and China, as it ended 25 years of separation between the two countries. PM Modi is expected to do the same during his three-day visit to China.

“Modi is considered as a state leader with strategic insights,” the Global Times stated.

“He may become a Nixon-style statesman because of his pragmatism and capacity to resolve major contradictions between China and India and to tackle the common challenges of development,” added the China daily.

The article titled “Modi’s Nixonian pragmatism refreshes ties,” published on the second day of Modi’s three-day visit to China, praised Modi for his “strategic insights” and “pragmatism.” Interestingly, a few days ahead of the visit, the same English daily had used “pragmatism” in a negative manner to criticize Modi. The article had stated, “Ever since Modi assumed office, he has taken the initiative to actively develop India’s relationships with Japan, the US, and European countries in no time, in order to promote the country’s poor infrastructure construction and economic development. But his diplomatic moves last year have proven that he is a pragmatist, rather than a visionary.”

This latest article, written by Y A Liu Zongyi, stated, “Modi’s victory in the country’s general elections last May has injected enormous confidence into India’s economic development as well as offering hope to the US, Japan and other nations attempting to take advantage of New Delhi to contain China.”

Liu Zongyi appealed to the two Asian giants to work together in harmony in order to achieve “common development.” He referred to the boundary disputes as an enigma in the relationship between the two countries.

“The boundary disputes are a conundrum in the bilateral relationship,” said the article, while adding, “If they can’t be solved at an earlier date, the two sides should more closely stick to the code of conduct they reached before.”

The article also talked about the economic ties between India and China stating, “New Delhi also holds an ambiguous attitude toward China’s ‘One Belt, One Road’ initiative,” which refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road and other regional economic cooperation plans.

“Though it joined the Asian Infrastructure Investment Bank (AIIB) as a founding member, there are suspicions among some Indian scholars that the bank will serve as an instrument of Chinese foreign and strategic policy,” wrote Zongyi in the article.

The piece also stated that both the countries should make efforts to bridge the differences between them.

It concluded, “It is a long-term task for the two sides to establish mutual strategic trust, but political resolutions of powerful leaders will inevitably accelerate this process.”