Dexter Roberts
Dexter Roberts: "Where I explain why China's disastrously bad stock markets are a sideshow to a much more serious property-plus private business-plus consumer confidence crisis -
'China is clearly concerned the markets have been doing terribly,' said Dexter Roberts, director of China affairs at the The Maureen and Mike Mansfield Center at the University of Montana. 'But the terrible stock market is not isolated by any means.'
'Roberts, who is the author of the book 'The Myth of Chinese Capitalism,' told Business Insider that boosting stocks won't solve the other issues plaguing the economy. He said the property market, for one, poses a more severe risk, given that most people's wealth and a large portion of the country's GDP is tied to real estate.
'Sinking property values have weakened confidence and compelled people to save more money, which reduces the available capital for investments.
'The amount of wealth held in the stock market is pretty insignificant compared to what's in the property market,' Roberts said. 'The long, continued decline in stocks is in part an embarrassment for the government, but it's unclear the real value of a rescue package.'
'In 2015, Beijing attempted a similar market intervention after a key segment of the Shanghai Stock Exchange lost a third of its value in a matter of weeks. The impact of that move, too, proved short-lived, which may foreshadow the effectiveness of any new package.
'Plus, Roberts notes that China's economic landscape in 2015 was far more stable and positive than it is today. Eight years ago, China was actively investing in its real estate sector, whereas authorities are now attempting to downsize it and reduce leverage.
Consumers in turn are stuck in 'multiple crises of confidence' across debt, property, and employment, Roberts said who also serves as a nonresident senior fellow at the Atlantic Council's Global China Hub and Indo-Pacific Security Initiative."
William Tobin and Joseph Webster