By South China Morning Post | Created at 2024-10-05 08:37:58 | Updated at 2024-10-05 11:20:46
2 hours ago
Are stock markets in major Asian nations, like those in the West, in danger of becoming masters rather than servants of their economies? The question has come to the fore lately in China and Japan as these markets increasingly dominate policy, with far-reaching potential consequences.
Much of China’s latest economic stimulus package is in the form of measures designed to boost a now rapidly rebounding stock market while in Japan the market has slumped on fears that it may not get enough attention from Prime Minister Shigeru Ishiba’s new government.
The temptation for governments, whether in planned, market or semi-market economies, to boost stock prices is growing, it seems, because of the potential this offers for quickly leveraging economic growth. But it is an addictive habit which tends to borrow growth from the future.
For China especially, and to a lesser extent for Japan, this approach could prove to be an excessive concession to the lure of a market economy where booms can be engineered but at the cost of subsequent busts.
It is understandable that China’s central and local governments should wish to use all the tools at their disposal to pull the world’s second largest economy out of the trough created by a property collapse and slumping demand.
But governments all over the world – and certainly not least in the United States – might be well advised to give more thought to the quality of economic growth created by stock market stimulus and its sustainability beyond short-term bubble creation.
