Power Struggle Involved in Chinese Stock Market Turmoil

July 15, 2015 Updated: July 15, 2015

News Analysis

HONG KONG—The current stock market turmoil in China could be the result of a power struggle, some analysts believe.

While Chinese Communist Party leader Xi Jinping, Premier Li Keqiang, and their officials are going all out to rescue the market, the official state-run media Xinhua News Agency has published an article stating that the bailout measures failed.

The news triggered panic in the market. Xinhua admitted failure on behalf of the authorities, apparently against Xi and Li’s will.

One analyst has said that Liu Yunshan, who is in charge of the propaganda system and is a loyalist of former Party leader Jiang Zemin, is behind the incident. Jiang is Xi’s political rival.

The recent stock market volatility has not brought much impact to the wealthiest in Hong Kong. The net worth of the wealthiest in China, however, has evaporated.

Prudential Securities Group founder Christopher Cheung says that the stock market volatility is also a major wealth reshuffle. He said that in the down market, the share prices of the five or six big developers in Hong Kong did not fall much, especially those with good performance.

It only impacted the rich in mainland China. Cheung believes the slightest sign of turmoil or a down market will set off sharp fluctuations and cause a wealth reshuffle, because all the assets of wealthy people are put into speculation, not industry.

Economic Journal founder Lam Hang-chi stated in an article that one of the causes of mainland China’s stock market disaster is that mainland investors lack common sense and the stock market lacks supervision.

Lam added that Premier Li should not call it “rescuing the stock market.” Instead, he should consolidate, put the malpractices to an end, and reduce the current stock market disaster.

Last week, Vice Minister of Public Security Meng Qingfeng led a team to China Securities Regulatory Commission to investigate illegal activities in stock trading.

Epoch Times previously reported that Xi’s anti-corruption campaign that purged Jiang’s supporters from the Party has been extended to the economic sector, and that there will be major economic policy adjustments and a wealth re-shuffle.

More companies and officials related to the Jiang faction will gradually be purged, and major personnel changes will take place. In order to make the right decisions, domestic and foreign investors need to know the latest developments of China’s political situation.

Translated by Michelle Tsun. Written in English by Sally Appert.