According to recent reports from mainland media, Chinese stocks have recently staged a long-lost “big rebound.” In addition to the collective increase of three Chinese e-commerce giants, Pinduoduo, JD.com, and Alibaba, other Chinese concept stocks also generally soared.
Dr. Xie Tian, chair professor at the University of South Carolina Aiken School of Business, believed such a revival was far from being normal.
He said, “It is very obvious to me that there is a force that is trying to create a strong return of Chinese stocks and a strong reversal of fortune at the start of the Beijing Winter Olympics.”
He believed that this particular force wanted to demonstrate that the economy was good and that people would not judge the Games and the Chinese government. Beijing has imposed strong measures to prepare for the sports event.
Xie Tan explained, “First of all, Chinese stocks, as we know, currently lack the capital or the basis to spike higher on the general market. Say, Poundland rose 12%, Jingdong closed up 8%, Alibaba closed up 9%. Here it says the whole increase was nearly $50 billion, it was clearly put in by someone.”
On China having no economic basis for a general surge, the professor elaborated, “we know that the current situation of China’s economy is bleak. China’s economic growth rate is falling sharply. And China’s retail sales of goods and household consumption have fallen dramatically. You can say that consumer confidence is declining.”
According to reports from the mainland, China’s new energy vehicle stocks rose across the board, such as NIO, which closed up 17%. However, Dr. Xie Tan reminded that Tesla is winning the Chinese market at present, with Chinese tend to be more fond of the brand because of their technology, reliable safety performance, and value.
He said, “Tesla’s success in China is effectively crushing all other electric vehicles in China. So in this case, in terms of economic fundamentals and business operations, you can’t see any basis for China’s new energy vehicle stocks to rise.”
The professor suggested that the sudden and illogical stock rise has been driven by coordination between the Chinese government and some high-level strategists. But as it has no economic basis, the rally will soon reverse.
Beijing could use overseas funds of various Chinese state-owned asset companies to boost the stock values. It can also cooperate with some Wall Street companies and suddenly start to buy in large quantities and raise the Chinese stakes.
In this regard, Dr. Xia Tan said the Chinese authorities and Wall Street have always cooperated together.
But he also reminded that “What we are looking at is not to see what kind of big rebound in the US stock market on Monday [February 7]. What we should look at is how long this rebound can last, because it is impossible to keep throwing money in for it forever.”