China: caught between control and openness

Great wall of ChinaThe Chinese response to recent stock market volatility shows "a serious tension between control and openness", according to a UK economist.

"The Chinese government is deeply worried about a sharp drop in the stock market," says Dennis Novy, who works for the University of Warwick. "Therefore, the government has been pumping a lot of financial firepower into the system to prop up markets."

Novy says the Chinese authorities' intervention to prevent some investors from selling was particularly controversial.

"Not surprisingly, this ban has rattled investors, further undermining confidence in the market," he says. "All this drama unfolds at a time when China is trying to open up its financial markets to international investors and turn the renminbi into an international currency."

The comment comes as Nigel Green, the chief executive of financial adviser deVere Group, advises investors to "China-proof" their portfolios to reduce risk.

However, some investors say Chinese intervention is not a cause for alarm. Emil Wolter, investment adviser at Comgest, says the moves are "not unprecedented".

"In our view they represent, at worst, a temporary step back in a continuing process of positive evolution and development of the domestic Chinese stock markets."

©2015 funds global asia

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