Recovery of the China Stock Market and Challenges in the Post-Crisis Era - Essay Example

In fact, an outflow of approximately US$25 billion was experienced by China in December only, and at some point in the fourth quarter of 2008 a sum of US$150 billion was pulled out from the country, according to the report of the Bank of China (Min-Chan 2009, 43). The dramatic economic growth of China has to a certain extent been fuelled by its thriving export-driven production. Nevertheless, the export of China by mid-2008 diminished to a ‘negative 20-percent growth rate from the positive 20-30 percent rate in previous years’ (Platt 2009, 50).

Because of these developments some financial analysts predicted that China would confront a financial crisis in 2009 and 2010. The prediction happened and this forced the Chinese government to initiate a set of stimulus package (Yao & Zhang 2011). These attempts of China to recover from the global financial crisis will be analyzed in this paper. The end of 2007 witnessed the sharp rise of China’s stock markets; however, the end of 2008 witnessed the bubbles’ remarkable rupture. The SSECI showed a decrease from 6,135 in 2007 to 1,608 in 2008 (Yao & Zhang 2011, 26).

It has improved to some extent, but has been wrestling to swing around 3,000 from the period of the bubble disintegration. The SSECI showed 2,900 at the end of 2010 (Yao & Zhang 2011, 26). These changes are shown in the figure below: China exposed the avenues to new share offerings, letting loose a stream of initial public offerings (IPOs) to aid in the absorption of surplus liquidity and calm a raging stock market. What began as a drop of IPOs became a surge, with numerous companies primed to register in the Shanghai Stock Exchange (Platt 2009).

According to Michael Guillen, professor of international management and director of the Lauder Institute, in his remark about the recovery attempts of China’s stock market in the Financial Times (2009), “During the last two years, monetary policy has